Hyundai Mobis Lowers Board Entry Bar Under Revised Commercial Act, Raising Governance Risks

Hyundai Mobis has amended its articles of incorporation in line with South Korea’s revised Commercial Act, a move expected to lower barriers for activist funds and minority shareholders seeking seats on the board. As a key affiliate in Hyundai Motor Group’s governance structure, the changes are fueling concerns that risks could grow during any future groupwide governance overhaul.

At its 49th annual shareholders meeting held March 17 at GS Tower in Seoul’s Gangnam district, Hyundai Mobis approved multiple charter revisions, including deleting a clause that excluded cumulative voting, clarifying directors’ duty of loyalty, renaming outside directors and strengthening audit committee composition requirements.

Most agenda items were tied to the revised Commercial Act, which is set to take effect this year. A central change is the so-called “3% rule,” under which voting rights of the largest shareholder and related parties will be capped at 3% when electing audit committee members starting July 23. Additional provisions scheduled for Sept. 10 include mandatory cumulative voting and expanded separate elections for audit committee members. The revisions aim to strengthen minority shareholder rights and board oversight, but companies view them as a new burden.

Hyundai Mobis is seen as central to any Hyundai Motor Group governance restructuring, and critics say the new rules could become a risk factor. With the removal of the cumulative-voting exclusion, the likelihood has increased that directors representing minority shareholders could be elected. Under cumulative voting, shareholders can cast all votes they hold — equal to the number of director candidates — for a single nominee. If more directors aligned with minority shareholders join the board, differing views could complicate efforts to push ahead with governance changes.

Hyundai Motor Group previously attempted a governance overhaul in 2018, but the plan was scrapped after opposition from activist hedge fund Elliott. The group is now the only one among South Korea’s top 10 conglomerates that still maintains a circular shareholding structure. In such a structure — for example, “Hyundai Mobis-Hyundai Motor-Kia-Hyundai Mobis” — a group can control the broader conglomerate with relatively small stakes. Converting that into a simpler, linear structure remains a long-standing goal for the group.