Fight for Corporate Integrity: Yuhan Corp.’s Shareholder Meeting Sparks Controversy

Yuhan Corp. Shareholders’ Meeting
Establishment of Chairman, Vice Chairman positions
Suspicions of Attempt to Privatize the Foundation

Yuhan Corp. sparks controversy due to internal division amid it announced the establishment of Chairman and Vice Chairman positions at the regular shareholders’ meeting on the following 15th.

It is because some employees are against the company’s movement to establish the positions of Chairman and Vice Chairman at the shareholders’ meeting by making changes in the articles of association. It is known that it is the first time in about 30 years that a Chairman position is being created within Yuhan Corp.

Those opposed argue that “the current management is trying to privatize the company using the new positions.”

Amid the controversy, news has emerged that New Yi Ling, a director of Yuhan Academy and the only granddaughter of the late New Il Han, the founder of Yuhan Corp., has hastily returned to Korea from the United States.

On the 13th, Director New Yi Ling of Yuhan Academy expressed, “I am worried that Yuhan Corp. seems to be moving away from my grandfather’s founding principles. Unfortunately, a company that was once a shining epitome of good corporate governance is losing the trust of its employees”.

It is reported that director New Yi Ling hastily returned to Korea to attend the shareholders’ meeting on the 15th. There is interest in whether the innovations will positively impact Yuhan Corp., a company strongly perceived as a clean company by being revered for the late Dr. New Il Han’s social contributions and the introduction of a pioneering professional management system.

Founded in 1926, Yuhan Corp. is a leading South Korean pharmaceutical company with the highest sales. The company name combines Yuhan, taken from the name of the founder and first chairman, Dr. New Il Han, with Yanghang, which means reaching out to the world.

Initially, the company only imported and sold American pharmaceuticals, but starting with Antipyrin in 1933, it began to devote itself to developing and selling domestic pharmaceuticals.

In 1936, it was the first South Korean company to implement an all-employee shareholder system, distributing 52% of the stocks held by New Il Han to employees for free. This marked the company as a clean business example, introducing a professional management system and not passing on management rights within the family.

The professional management system introduced then, based on promoting internal personnel rather than recruiting external personnel, contributed to the clean company image.

Dr. New Il Han was a person who thoroughly refused collusion between politics and business. He paid corporate taxes thoroughly but refused to give political funds, and because of that, the National Tax Service investigated him at the time.

A tax investigator who participated at the time passed down the review that “there are cases where there is not a single skeleton in the closet,” establishing its position as a clean company without a single tax evasion.

In the history of Yuhan Corp., only two people, Dr. New Il Han and his close associate, Advisor Yeon Man Hee, have ascended to the position of Chairman. It was the last time Yuhan Corp. had the Chairman position when the advisor Yeon Man Hee stepped down from the position of Chairman 28 years ago in 1996. This is why the position of Chairman and Vice Chairman was not mentioned in the articles of incorporation.

Employees opposing the amendment to the articles of incorporation claim that they see an intention for Lee Jung Hee, the current Chairman of the Board, to take the Chairman position. Chairman Lee Jung Hee served as the President of Yuhan Corp. from 2015 to 2021.

Online Community

In response to the creation of the Chairman position, they held a truck protest in front of the headquarters of Yuhan Corp. in Dongjak-gu, Seoul, on the 11th, the 53rd anniversary of the late Dr. New Il Han. It is reported that employees opposing the creation of the Chairman and Vice Chairman positions pooled money to lead the truck protest.

They have risen in protest against attempts to privatize Yuhan Corp., which has maintained a tradition of separating ownership and management with a system without an owner for 30 years. It is reported that about one-sixth of the total employees, or about 300 people, participated in the truck protest.

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A Yuhan Corp. official anonymously pointed out Chairman Lee Jung Hee’s actions in an online community, saying, “He doesn’t want to leave even after receiving approx. 4 million 500,786 dollars in severance pay and now aims for the Chairman position”.

In fact, most of those who served as CEO of Yuhan Corp. left the company at the end of their term, but Chairman Lee Jung Hee has even taken on the position of Chairman of the Board. He is known to have put the reappointment of the Chairman of the Board on the agenda for the shareholders’ meeting.

In response, Yuhan Corp. refuted, “This is a measure to make positions flexible to move forward as a global pharmaceutical company.” They explained that they decided that an organizational system suitable for the company’s size in the future is necessary based on the company’s quantitative and qualitative growth.

They also clarified, “There is absolutely no plan to appoint a specific person, and only the organizational system will be reformed at the shareholders’ meeting. There is no plan to appoint a Chairman. So it will be left vacant until a suitable person appears.”

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Director New Yi Ling is said to have hastily returned to Korea to refute the board’s position, arguing, “If it’s a position to be left vacant, why create it? It contradicts my grandfather’s will that the company belongs to society and its employees”.

Those who participated in the protest are known to be advocating for the reappointment of Director New Yi Ling to the Yuhan Foundation. In the structure of Yuhan Corp., the public interest foundation, Yuhan Foundation, is the largest shareholder, and the company’s profits are distributed to the foundation.

This structure was created when Dr. New Il Han separated ownership and management for the company’s social role. However, Chairman Lee Jung Hee became a foundation director, and Director New Yi Ling was not reappointed. This has raised suspicions that the foundation is being privatized.

The Yuhan Corp. board stated, “Due to the rule that only 20% of company insiders can participate in the public interest foundation, Director New Yi Ling’s position disappeared in the process of including Chairman Lee Jung Hee and Representative Cho Wook Jae of Yuhan Corp.”. They added, “There was a physical problem that Ms. New, who was in the United States during the COVID-19 period, could not attend the board meeting”.

However, the company’s explanation does not seem to be able to quell the controversy over privatization. As Yuhan Corp., a clean company that Dr. New Il Han has maintained, is being shaken by internal conflicts, there is a focus on whether Yuhan Corp. can preserve the image of a clean company with reform.