Icahn Proxies Get Tobacco Board Seat

Icahn Proxies Get Tobacco Board Seat. March. 18, 2006 03:00. by Sang-Soo Kim Jae-Dong Yu ssoo@donga.com jarrett@donga.com.

Carl Icahn`s allies, four U.S.-based hedge funds, succeeded in obtaining an independent seat on the board of Korea Tobacco and Ginseng, which means the beginning of an era of “sleeping with an enemy” for the nation`s largest tobacco and ginseng unit.

At a KT&G`s general shareholders` meeting held in the human resources development auditorium in Daedeok-gu, Daejeon on March 17, Warren Lichtenstein, the head of Steel Partners and one of Icahn’s allies, and Ahn Yong-chan, chief executive of Aekyung Co. who received support from KT&G were elected as outside directors.

The cumulative voting system was used for the first time ever in Korea.

Among the five candidates vying for the two outside directors’ seats, Lichtenstein earned the most votes with 84.8 million (39.57 percent), followed by An with 74.74 million votes (34.88 percent).

KT&G is the first Korean company to elect an overseas shareholder who is at odds with local management as an independent director.

For the outside auditing directors’ posts, all four candidates who had been recommended by KT&G were elected.

The ripple effect of having an overseas outside director is anticipated to be huge, even though the number is just one out of the 12-member board (three registered directors and nine outside directors). The Icahn-led investors will have access to all of the company’s private information, and they are likely to ask the company to sell off real estate and buy back its shares.

Moreover, the Icahn group’s attempt to gain managerial rights is expected to continue, given that the overseas investors are trying to control the board by putting more outside directors from their allies onto the board.