Five Recommendations to Hyundai Motor BoD
- Urging capital allocation experts Directors Suyi Kim and Benjamin Tan to take action
- Should Chairman ES Chung acquire additional stakes in Boston Dynamics, it could become a test case under the revised Korean Commercial Code
- Divest the stakes in Korea Zinc and KT - unrelated to core business - and return W1.7tr cash proceeds to shareholders
- Divest or securitize the GBC stake held by the three Hyundai Motor Group affiliates and redirect proceeds into future mobility investments
- Conduct share buybacks and cancellations centered on the severely undervalued preferred shares; the company must honor the commitment made by former CEO Jaehoon Chang in 2024. Preferred shareholders are being subjected to reverse discrimination
Hyundai Motor's board composition is, by chaebol standards, comparatively sound, in our view. Of the twelve directors, five are executive directors - among them Executive Chairman and CEO ES Chung and President and CEO José Muñoz - and seven are independent directors. Among the independent directors appointed in March 2025 are Suyi Kim, former the global head of PE, Canada Pension Plan Investment Board (CPPIB), and Benjamin Tan, former a Managing Director at the Government of Singapore Investment Corporation (GIC) - both internationally recognized veterans of investment. Also appointed in the same period was Jim Myong Doh, former Vice Chairman of Qualcomm Asia. Yet, whether because they remain in the minority, the Hyundai Motor board has produced no memorable initiatives over the past one to two years aimed at enhancing shareholder value. Directors Kim and Tan are capital allocation specialists - their more active engagement is hereby urged.
The Forum respectfully submits the following five recommendations to the Board of Hyundai Motor.
1. Rather than allocating the remaining 9.65% stake in Boston Dynamics in proportion to the existing shareholdings, Hyundai Motor should direct HMG Global LLC - the U.S. entity in which Hyundai holds a controlling 49.5% interest - to acquire the entirety of the residual stake. When Chairman Chung personally acquired a 20% interest in Boston Dynamics some five years ago, legal experts raised concerns as to its propriety. Debate has persisted over whether such transactions contravene the Monopoly Regulation and Fair Trade Act's prohibition on the transfer of corporate opportunities, as well as the Commercial Code's prohibition on directors' usurpation of corporate opportunities.
The "prohibition on the transfer of corporate opportunities" under the Monopoly Regulation and Fair Trade Act - applicable particularly to large business groups with total assets exceeding W5tr - bars the diversion of promising business opportunities that would substantially benefit the company to special related parties (including the controlling shareholder's family) or entities under their control. The provision encompasses conduct whereby the company intentionally forgoes or cedes business opportunities that it could itself pursue, directly or through other affiliates.
2. HMG Global LLC, established under the laws of the State of Delaware for the principal purpose of investing in and managing future business ventures, holds a 5% interest in Korea Zinc - a holding entirely unrelated to its stated corporate purpose, valued at approximately W1tr at current prices. This stake should be divested in the market without delay, with the proceeds applied to shareholder returns.
3. Hyundai Motor holds a 5% interest in KT in the form of cross-shareholdings. Cross-shareholdings are rightly regarded with caution under corporate governance principles. The two companies have invoked "strategic partnership" as justification, yet the rationale lacks persuasive force. The stake is valued at close to W700bn at current prices. It, too, should be divested, with proceeds returned to shareholders.
4. The GBC project - with W2tr in public contributions and W5tr in construction costs - is scheduled for completion in 2031. The Samsung-dong former Korea Electric Power Corporation (KEPCO) site was acquired in 2014 at the time of bidding for a price of W10.6tr by a consortium led by Hyundai Motor and joined by Hyundai Mobis and Kia. With aggregate expenditures exceeding W20tr (estimate), this represents the largest commercial real estate development ever undertaken in Korea. Even applying the 55% shareholding ratio established at the time of bidding, Hyundai Motor's total investment in GBC amounts to roughly 10% of its W132tr equity capital base. By comparison, the construction of Apple Park - the corporate headquarters of Apple Inc., a company with a market cap roughly 80 times that of Hyundai Motor - required an outlay of US$5bn.
Hyundai Motor is an automotive and mobility company, not a commercial real estate REIT. None of the world's foremost automotive and mobility companies - Tesla, Toyota, or the Volkswagen Group - utilize a complex of three 49-story luxury towers situated on some of the most valuable urban real estate as their corporate headquarters. The original vision of a single 105-story headquarters tower was, to the former Chairman MK Chung, "the symbol of the Group's next century" - a long-cherished ambition. It is wholly inappropriate that the shareholders of an automobile company should be funding the construction of a commercial building whose principal tenants are expected to be the "Big Three" of Korean department store operators - Lotte, Shinsegae, and Hanwha.
Even at this juncture, the GBC stakes held by the three Hyundai Motor Group affiliates should be divested, in whole or in part, or otherwise securitized, with the proceeds redirected toward investments in future mobility.
5. Share buybacks and cancellations should be conducted with a focus on the severely undervalued preferred shares. At the "2024 CEO Investor Day" held in August 2024, Jaehoon Chang, then President and CEO (currently Vice Chairman) of Hyundai Motor, announced a three-year share repurchase program totaling W4tr (equivalent to an annual reduction of approximately 2% of the issued shares), and further emphasized that "in executing share buybacks and cancellations, the discount applicable to preferred shares will be taken into account." Yet this commitment by the chief executive has remained unfulfilled. In a commentary published in February 2024, the Forum noted to Hyundai Motor's board and management that "the complete cancellation of high-cost preferred shares as a means of shareholder returns, and the consequent reduction of the overall cost of capital, is of considerable importance."
Between January 30th and April 21st of this year, the company repurchased W366.8 bn in common shares and, in aggregate, W32.1bn across the three classes of preferred shares pursuant to its share repurchase program. This represents a policy of reverse discrimination against preferred shareholders that falls short even of their relative weighting in market cap (W82tr vs W11tr). The current market price of the Class 2 preferred shares stands at 47% of the common share price. Repurchasing and canceling preferred shares with an equivalent outlay would yield more than double the per-won effect on share value relative to common shares.
The market speaks of the "skyscraper curse" and the "headquarters curse"- the notion that management entrusted with enhancing corporate value must be regarded with caution when it undertakes the construction of opulent headquarters, as focus tends to dissipate and organizational energy becomes dispersed. The skyscraper curse, in its historical sense, refers to an empirical hypothesis that construction booms of supertall buildings have presaged economic crises. A review of Korean corporate history further suggests that excessive investments in headquarters, or in real estate, golf courses, and hotels unrelated to core business, have frequently marked the beginning of corporate decline
.As companies grow in scale, headquarters facilities become necessary, and ownership of such facilities offers considerable benefits: employees derive a sense of pride, well-utilized spaces foster active communication and enhanced productivity. Yet one must remain vigilant against the vice of opulence exceeding substance. The Lotte Group, whose Lotte World Tower stands as the nation's foremost landmark and emblem of the conglomerate, has occasioned considerable public concern by pledging that very tower as collateral.
The Amorepacific headquarters in Yongsan is the work of the distinguished British architect Sir David Chipperfield. A visit to the building leaves one unable to contain one's admiration for its beauty and openness. An investment of W520bn was incurred over three years - a sum equivalent to 20% of the company's equity capital, and a substantial figure by any measure. Whether attributable to a loss of original purpose, the Yongsan headquarters project marked the inflection point in Amorepacific's operating performance. Since the building's completion in 2017, Amorepacific Holdings shares have declined by 85%, and Amorepacific shares by more than 60%.
From the standpoint of pragmatism, Chairman Chung's decision to abandon the original 105-story design in favor of three 49-story buildings is, in certain respects, intelligible. Nevertheless, shareholders find it difficult to comprehend how Hyundai Motor - at a moment when it must devote its full energies to competition in autonomous driving against China and the US - should find itself encumbered by a commercial real estate project requiring, inclusive of financing costs, an aggregate outlay exceeding W20tr.
July 21st, 2026
Korean Corporate Governance Forum
Chairman, Namuh Rhee
Five Recommendations to Hyundai Motor BoD
Hyundai Motor's board composition is, by chaebol standards, comparatively sound, in our view. Of the twelve directors, five are executive directors - among them Executive Chairman and CEO ES Chung and President and CEO José Muñoz - and seven are independent directors. Among the independent directors appointed in March 2025 are Suyi Kim, former the global head of PE, Canada Pension Plan Investment Board (CPPIB), and Benjamin Tan, former a Managing Director at the Government of Singapore Investment Corporation (GIC) - both internationally recognized veterans of investment. Also appointed in the same period was Jim Myong Doh, former Vice Chairman of Qualcomm Asia. Yet, whether because they remain in the minority, the Hyundai Motor board has produced no memorable initiatives over the past one to two years aimed at enhancing shareholder value. Directors Kim and Tan are capital allocation specialists - their more active engagement is hereby urged.
The Forum respectfully submits the following five recommendations to the Board of Hyundai Motor.
1. Rather than allocating the remaining 9.65% stake in Boston Dynamics in proportion to the existing shareholdings, Hyundai Motor should direct HMG Global LLC - the U.S. entity in which Hyundai holds a controlling 49.5% interest - to acquire the entirety of the residual stake. When Chairman Chung personally acquired a 20% interest in Boston Dynamics some five years ago, legal experts raised concerns as to its propriety. Debate has persisted over whether such transactions contravene the Monopoly Regulation and Fair Trade Act's prohibition on the transfer of corporate opportunities, as well as the Commercial Code's prohibition on directors' usurpation of corporate opportunities.
The "prohibition on the transfer of corporate opportunities" under the Monopoly Regulation and Fair Trade Act - applicable particularly to large business groups with total assets exceeding W5tr - bars the diversion of promising business opportunities that would substantially benefit the company to special related parties (including the controlling shareholder's family) or entities under their control. The provision encompasses conduct whereby the company intentionally forgoes or cedes business opportunities that it could itself pursue, directly or through other affiliates.
2. HMG Global LLC, established under the laws of the State of Delaware for the principal purpose of investing in and managing future business ventures, holds a 5% interest in Korea Zinc - a holding entirely unrelated to its stated corporate purpose, valued at approximately W1tr at current prices. This stake should be divested in the market without delay, with the proceeds applied to shareholder returns.
3. Hyundai Motor holds a 5% interest in KT in the form of cross-shareholdings. Cross-shareholdings are rightly regarded with caution under corporate governance principles. The two companies have invoked "strategic partnership" as justification, yet the rationale lacks persuasive force. The stake is valued at close to W700bn at current prices. It, too, should be divested, with proceeds returned to shareholders.
4. The GBC project - with W2tr in public contributions and W5tr in construction costs - is scheduled for completion in 2031. The Samsung-dong former Korea Electric Power Corporation (KEPCO) site was acquired in 2014 at the time of bidding for a price of W10.6tr by a consortium led by Hyundai Motor and joined by Hyundai Mobis and Kia. With aggregate expenditures exceeding W20tr (estimate), this represents the largest commercial real estate development ever undertaken in Korea. Even applying the 55% shareholding ratio established at the time of bidding, Hyundai Motor's total investment in GBC amounts to roughly 10% of its W132tr equity capital base. By comparison, the construction of Apple Park - the corporate headquarters of Apple Inc., a company with a market cap roughly 80 times that of Hyundai Motor - required an outlay of US$5bn.
Hyundai Motor is an automotive and mobility company, not a commercial real estate REIT. None of the world's foremost automotive and mobility companies - Tesla, Toyota, or the Volkswagen Group - utilize a complex of three 49-story luxury towers situated on some of the most valuable urban real estate as their corporate headquarters. The original vision of a single 105-story headquarters tower was, to the former Chairman MK Chung, "the symbol of the Group's next century" - a long-cherished ambition. It is wholly inappropriate that the shareholders of an automobile company should be funding the construction of a commercial building whose principal tenants are expected to be the "Big Three" of Korean department store operators - Lotte, Shinsegae, and Hanwha.
Even at this juncture, the GBC stakes held by the three Hyundai Motor Group affiliates should be divested, in whole or in part, or otherwise securitized, with the proceeds redirected toward investments in future mobility.
5. Share buybacks and cancellations should be conducted with a focus on the severely undervalued preferred shares. At the "2024 CEO Investor Day" held in August 2024, Jaehoon Chang, then President and CEO (currently Vice Chairman) of Hyundai Motor, announced a three-year share repurchase program totaling W4tr (equivalent to an annual reduction of approximately 2% of the issued shares), and further emphasized that "in executing share buybacks and cancellations, the discount applicable to preferred shares will be taken into account." Yet this commitment by the chief executive has remained unfulfilled. In a commentary published in February 2024, the Forum noted to Hyundai Motor's board and management that "the complete cancellation of high-cost preferred shares as a means of shareholder returns, and the consequent reduction of the overall cost of capital, is of considerable importance."
Between January 30th and April 21st of this year, the company repurchased W366.8 bn in common shares and, in aggregate, W32.1bn across the three classes of preferred shares pursuant to its share repurchase program. This represents a policy of reverse discrimination against preferred shareholders that falls short even of their relative weighting in market cap (W82tr vs W11tr). The current market price of the Class 2 preferred shares stands at 47% of the common share price. Repurchasing and canceling preferred shares with an equivalent outlay would yield more than double the per-won effect on share value relative to common shares.
The market speaks of the "skyscraper curse" and the "headquarters curse"- the notion that management entrusted with enhancing corporate value must be regarded with caution when it undertakes the construction of opulent headquarters, as focus tends to dissipate and organizational energy becomes dispersed. The skyscraper curse, in its historical sense, refers to an empirical hypothesis that construction booms of supertall buildings have presaged economic crises. A review of Korean corporate history further suggests that excessive investments in headquarters, or in real estate, golf courses, and hotels unrelated to core business, have frequently marked the beginning of corporate decline
.As companies grow in scale, headquarters facilities become necessary, and ownership of such facilities offers considerable benefits: employees derive a sense of pride, well-utilized spaces foster active communication and enhanced productivity. Yet one must remain vigilant against the vice of opulence exceeding substance. The Lotte Group, whose Lotte World Tower stands as the nation's foremost landmark and emblem of the conglomerate, has occasioned considerable public concern by pledging that very tower as collateral.
The Amorepacific headquarters in Yongsan is the work of the distinguished British architect Sir David Chipperfield. A visit to the building leaves one unable to contain one's admiration for its beauty and openness. An investment of W520bn was incurred over three years - a sum equivalent to 20% of the company's equity capital, and a substantial figure by any measure. Whether attributable to a loss of original purpose, the Yongsan headquarters project marked the inflection point in Amorepacific's operating performance. Since the building's completion in 2017, Amorepacific Holdings shares have declined by 85%, and Amorepacific shares by more than 60%.
From the standpoint of pragmatism, Chairman Chung's decision to abandon the original 105-story design in favor of three 49-story buildings is, in certain respects, intelligible. Nevertheless, shareholders find it difficult to comprehend how Hyundai Motor - at a moment when it must devote its full energies to competition in autonomous driving against China and the US - should find itself encumbered by a commercial real estate project requiring, inclusive of financing costs, an aggregate outlay exceeding W20tr.
July 21st, 2026
Korean Corporate Governance Forum
Chairman, Namuh Rhee