Hyundai shareholders inflict big defeat on U.S. fund Elliott in proxy vote

Hyundai Motor Group companies’ shareholders rejected on Friday Elliott Management’s demands for a massive special dividend and board seats, dealing a blow to the U.S. hedge fund’s campaign to shake up South Korea’s second-biggest family-run conglomerate.

Although Hyundai fended off the threat from Elliott at the closely watched vote, it still faces a daunting challenge of winning shareholder support for a planned restructuring that should aid the handover of the group’s reins to heir apparent Euisun Chung.

Elliott thwarted Hyundai’s restructuring proposal last year, and Friday’s win would have provided fresh impetus to empower small investors in Asia’s fourth-largest economy, long dominated by powerful elites accused of taking minority investors for granted.

But activist investor Paul Singer’s $34 billion fund failed to convince other shareholders on Friday that the group should pay out excess cash and bring in more independent directors to improve governance and accountability.

Its demand for 7 trillion won ($6.2 billion) in dividend – more than six times what Hyundai had offered – was rejected by other minority shareholders on the grounds that the automaking group needed to lift investment in new technologies at a time of plunging profit.

“The dividend proposed by the shareholder (Elliott) may sound tempting, but in the long term, it is like a poisoned chalice or nothing but cutting open the belly of a goose with the golden eggs,” Hyundai Motor shareholder Na Hong-seob said at the automaker’s annual general meeting in Seoul.

Elliott also wanted a total of five board nominees at Hyundai Motor and Hyundai Mobis to address “governance shortcomings”, citing investments in non-core assets such as a $10 billion land acquisition in Seoul’s Gangnam business district.

As of November, Elliott held more than 2.5 percent of common stock in Hyundai Mobis, 3 percent in Hyundai Motor and 2.1 percent in affiliate Kia Motors.

Hyundai Motor India Ltd.