Court Denies Icahn Voting Complaint

A Carl Icahn-led consortium has failed to win backing from a court over its claim that Korea Tobacco and Ginseng’s (KT&G) director voting procedures are illegal.

KT&G will therefore be allowed to select four audit committee directors and two regular independent directors separately in a shareholders’ meeting on March 17 as decided by its board earlier.

The announcement means that KT&G has secured a favorable position by winning its first legal battle against Carl Icahn and his partners.

However, the dispute over management rights will continue because the Carl Icahn consortium is expected stay on the offensive. On March 14, the Daejeon District Court overruled Icahn’s claim, saying, “We do not find that KT&G’s separate voting system for regular and audit directors encroaches upon the minority shareholders’ right to a choice of directors like Carl Icahn and his partners claim.”

The court stood on KT&G’s side, ruling, “Both separate and collective voting for directors are consistent with the current commercial and securities transaction laws. Which to choose between the two depends on the board as long as there is no special proposal from shareholders during a shareholder proposal period.”

The court also said, “The Carl Icahn consortium did not make issue with the voting method itself during a shareholder proposal period, although they argued that it was not in line with the law. All they wanted was to include three nominees they recommended as candidates for directors.”

Attorney Song Hyun-woong, representing Carl Icahn and his partners, said, “It is sad that the court made a compromise ruling in a case that will leave a clear precedent for minority shareholders’ proposals. We will decide whether to make an appeal after consulting with the Icahn consortium.”

Lawyer Park Kyo-seon, representing KT&G, said, “If Icahn appeals, the case will be heard in an appeals court again. But I don’t think there is enough time for that because the shareholders’ meeting is scheduled for March 17.”

Meanwhile, the National Pension Service, which has a 3.44 percent stake in the company, expressed its support for KT&G yesterday. The announcement means that all domestic institutional investors with a stake in KT&G have expressed their support for the company.