This article was published on the ChosunBiz MoneyMove (MM) site on April 25, 2025, at 10:46 a.m.
The Supreme Court ruled that former NAMYANG DAIRY PRODUCTS Chairman Hong Won-sik's "self-approval of compensation limit" was unlawful. After a two-year lawsuit, former Chairman Hong ultimately lost.
According to investment banks (IB) and the legal community on the 25th, the Supreme Court's Civil Division 3 rejected the appeal in the lawsuit filed by auditor Shim Hye-seop against NAMYANG DAIRY PRODUCTS, which sought to overturn the resolution of the shareholders' meeting, ruling in favor of former Chairman Hong.
The lawsuit began when auditor Shim Hye-seop claimed that there was an issue with agenda item 6, "limit on director remuneration," from the regular shareholders' meeting of NAMYANG DAIRY PRODUCTS held in May 2023. If the resolution is deemed significantly unfair, the auditor can file a lawsuit for revocation within two months from the date of the resolution.
At the shareholders' meeting, the limit on director remuneration was set at 5 billion won, and the fact that former Chairman Hong cast a favorable vote on the resolution for his own remuneration limit became an issue. This was because former Chairman Hong was the largest shareholder holding more than half of NAMYANG DAIRY PRODUCTS' equity and a board member. Article 368, Section 3 of the Commercial Act states that "a person with a special interest in a resolution of the general meeting may not exercise voting rights."
Former Chairman Hong later participated in the trial through an application for independent party participation and appealed. In this case, the plaintiff is auditor Shim, while the defendant is NAMYANG DAIRY PRODUCTS, of which Han & Company is the major shareholder; however, the party most affected by the ruling is former Chairman Hong.
In May of last year, the first trial court pointed out that former Chairman Hong cast a favorable vote despite being a stakeholder unable to exercise voting rights, and issued a ruling to revoke the resolution.
This January, the Seoul High Court also dismissed former Chairman Hong's appeal, upheld the first trial ruling, and sided with auditor Shim. The court determined that former Chairman Hong's application to participate as an independent party was inadmissible and concluded the trial without further proceedings.
With the dismissal of the appeal, former Chairman Hong's loss has been confirmed, significantly reducing the retirement pay he could receive. Initially, former Chairman Hong was expected to receive 17 billion won in retirement pay.
An industry official evaluated that "this ruling sets an important precedent for ensuring the fairness of shareholder meeting resolutions and the transparency of corporate governance."