Welcoming SK Hynix’s stock cancellation and recommending ADR issuance
The board, composed of academics and Kim & Chang lawyers requires a major upgrade
- The company should initiate share repurchase & ADR listing; buyback 10-15% of total shares with some for cancellation while the majority for the US listing
- BoD should disclose the capital allocation framework with explosion in FCF
- The board's heavy reliance on legal and academic professionals who lack business experience is a serious concern. The board must be reconstructed with the capital markets and corporate governance experts for independence and focus on shareholder value
- A proposed US AI subsidiary must not become a 'black box' without oversight from Hynix shareholders or Korean financial regulators. Any significant investment must be vetted and approved by the SK Hynix Board.
We welcome SK Hynix’s January 28th announcement to cancel W12.2 trillion worth of treasury shares (equivalent to 2.1% of total issued shares). Had the Board been truly independent and possessed a clear understanding of capital allocation, this resolution would have been passed much sooner last year. While this is a positive step, it underscores the need for a board that can act decisively on shareholder value without delay.
Our Forum recommends the following four measures to the board of directors and management.
1. SK Hynix must execute an immediate share buyback and pursue a fungible ADR listing. While the company recently disclosed that “U.S. ADR listing options are under review with no confirmed details”, we urge the repurchase of 10~15% of total issued shares. A small portion should be cancelled, with the majority listed in the U.S. To ensure sufficient liquidity and attract major ETF inclusion, the ADR issuance should reach a scale of $20~$30 billion.
An ADR listing alone will not immediately lead to an equity valuation re-rating as many locals argue. Governance improvements are necessary for a proper equity revaluation. The board must be independent from the SK Group’s influence and enhance transparency, ensuring all decisions comply with the revised Commercial Act: “Protect the interests of all shareholders and treat them fairly.” It is noted that Chairman Chey Tae-won does not directly hold any SK Hynix shares.
2. We demand for a clear capital allocation framework. According to CLSA forecasts, the company is projected to generate operating profit of W129 trillion in 2026 and W160 trillion in 2027. Even after capex of W32 trillion and W36 trillion over the next two years, SK Hynix will generate cash flows far exceeding its investment needs. FCF is expected to reach W92 trillion in 2026 and W116 trillion in 2027. Consequently, cash balance could grow to W115 trillion by the end of this year and W225 trillion by the end of 2027. As of the end of Q3 2025, the company has already cleared its debt and transitioned to a net cash position.
However, the 4Q dividend of W1,875 per share is very disappointing. On an annual basis, the total dividend of W3,000 represents a yield of just 0.35% and a payout ratio of only 5%. The Board’s core responsibility is capital allocation. In December 2024, our Forum gave the company’s value‑up plan a grade of C, mainly due to its unclear capital allocation policy. Given good growth prospects and high profitability, we agree that the company should invest large cash flows into the future, but FCF should be returned to shareholders through dividends and share buybacks/cancellations.
3. The board should be upgraded to end bias toward academia and Kim & Chang lawyers. The board must be reconstructed with the capital markets and corporate governance experts.
The current Board consists of four Executive Directors and five Independent Directors. The Chair of the Board is Ae-Ra Han, a professor at Sungkyunkwan University Law School and a former judge and lawyer at the powerful Kim & Chang. Among the five independent directors, three are academics (two from engineering, one from accounting), while the remaining two are currently or previously affiliated with Kim & Chang. With one sole exception, the four members possess zero business experience.
Following the successful cases of the US Big Tech and TSMC, the company should reduce its Executive Directors to a single seat (CEO Kwak Noh-Jung) and fill the remaining board positions with truly independent directors. TSMC founder Morris Chang famously asserted, "Independent directors must be equal to or superior to the CEO in terms of knowledge, experience, and insight." The company must recruit global experts - particularly in capital markets and corporate governance - to strike a balance between future investments (capex, R&D, M&A) and shareholder returns (dividends, buyback/cancellations).
4. A new US AI subsidiary must not become a 'black box' without oversight from shareholders or Korean financial regulators. Any significant investment must be vetted and approved by the SK Hynix board. Investors have a low level of trust in the SK Group and Chairman Chey Tae-won. Having entered the battery market too late, SK on has accumulated tens of trillions in debt, resulting in an operating loss of W931.9 billion in 2025. Furthermore, SK Innovation recently amended its disclosure regarding the Kentucky BlueOval SK plant disposal to Ford, slashing the asset value from W9.89 trillion to W5.83 trillion - effectively reflecting a W4 trillion+ write-down in asset value. The aggressive M&A and business expansion led by the Chey family, once packaged as a "Financial Story," has failed. It left behind only massive debt, while the two brothers formally stepped back from management, handing the reins to their cousin - hardly the picture of responsible leadership. Fortunately, under the leadership of Chairman Chey Chang-won, debt is decreasing and group management is returning to normal.
Too much cash often invites strategic recklessness. Chairman Chey Tae-won’s recent call for a W1,400tn (or US$970bn) investment in AI data centers is staggering, considering it is nearly 100x the market cap of SK Inc a year ago. Given the Chairman's history of attributing past strategic failures to professional managers rather than assuming personal accountability, the establishment of a US AI subsidiary - a "great-grandchild" of SK Inc controlled by Chairman Chey - is deeply concerning. Establishing a corporate governance firewall while the initial investment is pegged at W10 trillion+, continuous capital injections from SK Hynix could cause this figure to balloon, creating a massive offshore vehicle beyond the reach of shareholder oversight and domestic financial regulators. This "governance blind spot" may pose significant risks to transparency and risk management. To protect shareholder value, all large-scale projects and capital calls related to this entity must be subject to mandatory, independent review and approval by the SK Hynix Board of Directors.
January 29th, 2026
The Korean Corporate Governance Forum
Chairman, Namuh Rhee
Welcoming SK Hynix’s stock cancellation and recommending ADR issuance
The board, composed of academics and Kim & Chang lawyers requires a major upgrade
We welcome SK Hynix’s January 28th announcement to cancel W12.2 trillion worth of treasury shares (equivalent to 2.1% of total issued shares). Had the Board been truly independent and possessed a clear understanding of capital allocation, this resolution would have been passed much sooner last year. While this is a positive step, it underscores the need for a board that can act decisively on shareholder value without delay.
Our Forum recommends the following four measures to the board of directors and management.
1. SK Hynix must execute an immediate share buyback and pursue a fungible ADR listing. While the company recently disclosed that “U.S. ADR listing options are under review with no confirmed details”, we urge the repurchase of 10~15% of total issued shares. A small portion should be cancelled, with the majority listed in the U.S. To ensure sufficient liquidity and attract major ETF inclusion, the ADR issuance should reach a scale of $20~$30 billion.
An ADR listing alone will not immediately lead to an equity valuation re-rating as many locals argue. Governance improvements are necessary for a proper equity revaluation. The board must be independent from the SK Group’s influence and enhance transparency, ensuring all decisions comply with the revised Commercial Act: “Protect the interests of all shareholders and treat them fairly.” It is noted that Chairman Chey Tae-won does not directly hold any SK Hynix shares.
2. We demand for a clear capital allocation framework. According to CLSA forecasts, the company is projected to generate operating profit of W129 trillion in 2026 and W160 trillion in 2027. Even after capex of W32 trillion and W36 trillion over the next two years, SK Hynix will generate cash flows far exceeding its investment needs. FCF is expected to reach W92 trillion in 2026 and W116 trillion in 2027. Consequently, cash balance could grow to W115 trillion by the end of this year and W225 trillion by the end of 2027. As of the end of Q3 2025, the company has already cleared its debt and transitioned to a net cash position.
However, the 4Q dividend of W1,875 per share is very disappointing. On an annual basis, the total dividend of W3,000 represents a yield of just 0.35% and a payout ratio of only 5%. The Board’s core responsibility is capital allocation. In December 2024, our Forum gave the company’s value‑up plan a grade of C, mainly due to its unclear capital allocation policy. Given good growth prospects and high profitability, we agree that the company should invest large cash flows into the future, but FCF should be returned to shareholders through dividends and share buybacks/cancellations.
3. The board should be upgraded to end bias toward academia and Kim & Chang lawyers. The board must be reconstructed with the capital markets and corporate governance experts.
The current Board consists of four Executive Directors and five Independent Directors. The Chair of the Board is Ae-Ra Han, a professor at Sungkyunkwan University Law School and a former judge and lawyer at the powerful Kim & Chang. Among the five independent directors, three are academics (two from engineering, one from accounting), while the remaining two are currently or previously affiliated with Kim & Chang. With one sole exception, the four members possess zero business experience.
Following the successful cases of the US Big Tech and TSMC, the company should reduce its Executive Directors to a single seat (CEO Kwak Noh-Jung) and fill the remaining board positions with truly independent directors. TSMC founder Morris Chang famously asserted, "Independent directors must be equal to or superior to the CEO in terms of knowledge, experience, and insight." The company must recruit global experts - particularly in capital markets and corporate governance - to strike a balance between future investments (capex, R&D, M&A) and shareholder returns (dividends, buyback/cancellations).
4. A new US AI subsidiary must not become a 'black box' without oversight from shareholders or Korean financial regulators. Any significant investment must be vetted and approved by the SK Hynix board. Investors have a low level of trust in the SK Group and Chairman Chey Tae-won. Having entered the battery market too late, SK on has accumulated tens of trillions in debt, resulting in an operating loss of W931.9 billion in 2025. Furthermore, SK Innovation recently amended its disclosure regarding the Kentucky BlueOval SK plant disposal to Ford, slashing the asset value from W9.89 trillion to W5.83 trillion - effectively reflecting a W4 trillion+ write-down in asset value. The aggressive M&A and business expansion led by the Chey family, once packaged as a "Financial Story," has failed. It left behind only massive debt, while the two brothers formally stepped back from management, handing the reins to their cousin - hardly the picture of responsible leadership. Fortunately, under the leadership of Chairman Chey Chang-won, debt is decreasing and group management is returning to normal.
Too much cash often invites strategic recklessness. Chairman Chey Tae-won’s recent call for a W1,400tn (or US$970bn) investment in AI data centers is staggering, considering it is nearly 100x the market cap of SK Inc a year ago. Given the Chairman's history of attributing past strategic failures to professional managers rather than assuming personal accountability, the establishment of a US AI subsidiary - a "great-grandchild" of SK Inc controlled by Chairman Chey - is deeply concerning. Establishing a corporate governance firewall while the initial investment is pegged at W10 trillion+, continuous capital injections from SK Hynix could cause this figure to balloon, creating a massive offshore vehicle beyond the reach of shareholder oversight and domestic financial regulators. This "governance blind spot" may pose significant risks to transparency and risk management. To protect shareholder value, all large-scale projects and capital calls related to this entity must be subject to mandatory, independent review and approval by the SK Hynix Board of Directors.
January 29th, 2026
The Korean Corporate Governance Forum
Chairman, Namuh Rhee