Weekly ESG Controversies (August 19~25)

Key Takeaways

Rising Labor Practice Risks

• KUMHO TIRE has reported four worker fatalities within five months, resulting in the CEO's indictment and a significant increase in 'Employee Health and Safety' risk from 5.73% to 16.04%.

• HANWHA OCEAN faces escalated risks as labor unions organize joint strikes involving both permanent and temporary workers.

Competitive Behavior Risks in Internet Media & Services

• The Korea Fair Trade Commission is investigating KAKAO and NAVER for potentially unfair practices in the subscription economy, including policies related to cancellations and refunds.

• KAKAO is also under scrutiny following its acquisition of Baram Pictures, raising concerns reminiscent of previous controversies involving the company.

Internal Control Reviews in Financial Institutions

• WOORI FINANCIAL GROUP and KB FINANCIAL GROUP face criticism over internal control failures, prompting an upcoming inspection by the Financial Supervisory Service.

1. Employee Health & Safety (16.04%)

   • There is growing controversy surrounding the handling of worker fatalities at KUMHO TIRE and three other companies

2. Competitive Behavior (13.89%)

   • KAKAO and NAVER, together holding a 33.13% share, have highlighted risks within the internet media & services industry

   • LG Display has faced controversy over the leakage of technology by former employees

3. Business Ethics (13.19%)

   • Following the unfair lending scandal at WOORI FINANCIAL GROUP, controversy over internal control failures has intensified. In response, the Financial Supervisory Service is set to conduct a rigorous inspection of KB FINANCIAL GROUP

   • Arrest warrants have been issued for Chairman Kim Young-joon and other executives of EHWA TECHNOLOGIES INFORMATION on charges of violating the Capital Markets Act

4. Systemic Risk Management (9.78%)

   • KOREA ELECTRIC POWER Corporation's plan to expand a substation in Hanam City, Gyeonggi Province, has been denied due to opposition from local governments and residents, raising concerns over potential disruptions in power supply to the metropolitan area

   • The focus on managing Common Equity Tier 1 (CET1) capital by financial holding companies has led to a near-complete halt in private equity fund (PEF) investments, highlighting the importance of systemic risk management

5. Labor Practices (7.31%)

   • Hanwha Ocean has sparked controversy after facing a unified labor union protest due to its mass lawsuits against union members

   • Kumho Tire's labor union has brought attention to labor practices by filing a complaint against the CEO following a series of recent worker fatalities

This week underscores the necessity of proactive and comprehensive management of emerging controversies. SEAH BESTEEL HOLDINGS received significant attention after the deaths of five workers under the Serious Accident Punishment Act, but similar scrutiny is now on KUMHO TIRE, which has reported four worker fatalities in the past five months. These incidents have led to the CEO's indictment and heightened concerns over employee health and safety risks.

Meanwhile, WOORI FINANCIAL GROUP is facing criticism for internal control failures, including embezzlement, breach of trust, and allegations of improper loans to the former chairman's relatives. KB FINANCIAL GROUP, already under examination for issues related to ELS compensation, is now subject to a regular inspection by the Financial Supervisory Service.

Additionally, Netflix, Spotify, and other OTT and music streaming services are under scrutiny for their cancellation and refund policies, highlighting similar risks for KAKAO and NAVER.

These cases emphasize the importance of vigilant management of existing controversies and suggest that even companies not currently exposed to such risks should enhance their oversight and governance practices to prevent potential issues.

Disclaimer: This content was made with the help of AI. It may contain errors or inaccuracies, and should not be relied upon as a substitute for professional advice. The information contained in this article is not investment advice. FairLabs does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.

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