SEOUL -- South Korea's Hyundai Motor Co. looks set to face stiff criticism from shareholders on Friday when it seeks their approval to appoint the chairman's son as vice president of the country's largest auto maker.
The move comes as the issue of corporate transparency, and in particular the business practices of South Korea's family-run conglomerates, have come under close scrutiny.
The new administration of President Roh Moo-hyun has pledged to clamp down on the conglomerates, known as chaebol, which are under the spotlight after a $1.2 billion accounting scandal at SK Group, the fourth-biggest business group.
Hyundai, 10 percent owned by U.S-German auto maker DaimlerChrysler AG, will seek an approval from shareholders on Friday for its promotion of Chung Eui-sun, a 33-year-old son of company chairman Chung Mong-koo.
"We expect to get the approval without many problems at a shareholders' meeting," a company spokesman said on Tuesday.
But civic groups have voiced strong opposition to Hyundai's management shake-up announced in January.
"It's unfair that Chung has been promoted so fast just because he is a son of the owner," said Park Kun-yong, an official at the civic group People's Solidarity for Participatory Democracy.
"His management ability has not been proven yet... The company's opaque corporate governance will adversely affect share prices, therefore hurting shareholders' value."
Hyundai shares were up 3.7 percent at 22,600 won near noon, defying a 0.3 percent decline in the broader market. The shares have underperformed the benchmark index by about seven percent over the past three months.
"It's not desirable, but it's not just Hyundai's problems," said Park In-hee, a fund manager at KB Asset Management Co. "It happens all the time in Korea and it would take decades to overhaul the practice."
Though South Korea's economy has grown by leaps and bounds in recent decades to become the world's 13th largest, analysts say corporate governance has improved little, holding back foreign investors from making big bets on Korean companies.
Early this year, Samsung Electronics, South Korea's largest company in terms of market value, promoted Lee Jae-yong, the only son of Chairman Lee Kun-hee, to vice president of the world's top memory chip maker. That move provoked severe media criticism.
New South Korean President Roh Moo-hyun has vowed to take a tough stance against big conglomerates, saying unfair business practices at the sprawling companies could sow the seeds of another financial crisis.
"The promotion is not likely to change Hyundai's management very much," Park said. "But it may pose some risks as the new administration is set to crack down on the chaebol."
Hyundai Chairman Chung is the automaker's third-largest shareholder with a 3.15 percent stake while his son Eui-son has only a small number of shares.
"As Chung is likely to be the ultimate successor, he should learn management anyway," said Lee Dong-won, an analyst at LG Investment and Securities. "The question is how he will inherit his father's stake in the company later on."