Calls KT&G “a textbook case of governance corruption in Korea”

Flashlight Capital Partners Pte. Ltd. (“Flashlight Capital”), a shareholder of KT&G Corporation (KRX: 033780) (“KT&G” or the “Company”), announced that it has filed a shareholder derivative lawsuit against KT&G’s board members to recover damages caused by the illegal donation of treasury shares. All recovered damages from FCP’s lawsuit will go directly to KT&G. FCP will cover all legal expenses related to this action to promote improved governance at KT&G and in Korea more broadly.

The lawsuit concerns KT&G’s donation of treasury shares worth 1 trillion won to various entities including foundations led by former CEOs and internal welfare funds. In January 2024, FCP formally requested that KT&G’s board initiate legal action against 21 board directors involved in these illegal donations. However, KT&G has yet to take any action.

FCP alleges that these donations were a meticulously planned scheme involving former CEO Min, who was later imprisoned on bribery charges. As a result of these illegal donations, these entities have accumulated voting rights exceeding 12%, effectively making them the de facto largest shareholder.

Separately, KT&G still holds 13% of treasury stock, leaving uncertainty about how the Company intends to do with this large stake. In November 2023, the company announced plans to cancel a part of its treasury shares within three years. However, aside from cancelling 2.5% in early 2024, no further actions have been taken.

Concerns have been further amplified by a statement from current CEO Bang Kyung Man, who claimed that “cancelling treasury shares has limited impact on stock prices.” “We are deeply concerned that KT&G might once again attempt to donate its treasury shares to ghost foundations,” said Sanghyun Lee, Managing Partner of Flashlight Capital.

Sanghyun added, “In February, we plan to present CEO Bang’s first-year performance scorecard to the shareholders.”

About Flashlight Capital

Flashlight Capital Partners Pte. Ltd is an investment management firm founded by the Carlyle Group’s former Head of Korea, Sanghyun Lee. Flashlight Capital is dedicated to strengthening corporate governance and enacting transformative change to its portfolio companies. For more information about Flashlight Capital, please visit www.FlashlightCap.com and YouTube channel (https://www.youtube.com/watch?v=21Uk4bg3tgM).

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