KT&G Investor Urges Transparent CEO Search

Flashlight Capital Partners (FCP) is urging KT&G to select its next CEO in a more transparent manner.

In a video published ahead of the South Korean tobacco firm’s annual general meeting in March 2024, FCP highlighted what it considered the problems during previous CEO nominations. It lamented the fact that current CEO Beak Bok-in was the only candidate, for example, and criticized the board’s unusually swift 11-day decisionmaking.

FCP also expressed disappointment in the performance of Baek, who has held the position for three consecutive terms. Over nine years, KT&G stock fell by 19 percent while the KOSPI index rose by 26 percent, according to FCP.

The investor questioned management’s “vain pursuit on volume” at the expense of profit, noting a 40 percent revenue growth coupled with a 17 percent decrease in operating profit. FCP pointed to such “lack of profit motive” as a primary cause for the stock’s over 50 percent discount relative to its peers.

To address the shortcomings, Sanghyun Lee, managing partner of Flashlight Capital, suggested allowing sufficient time for a proper candidate evaluation process; considering outsiders with fast-moving consumer goods expertise; and thoroughly documenting the process for the sake of transparency.

“The 11-day CEO nomination is unprecedented in Korea, standing out even among other former government-owned companies,” said Lee in a statement.

In 2022, KT&G rebuffed a request by FCP to spin of its lucrative ginseng business and appoint certain outside directors.