While debate lingers between shareholders over whether the South Korean tobacco maker KT&G’s current chief Baek Bok-in should be reappointed, a global proxy advisory firm Institutional Shareholder Services spoke in favor of Baek’s reappointment, industry sources said Wednesday.

Prior to the shareholders meeting slated for March 16, the state-run Industrial Bank of Korea -- the second-largest single shareholder of KT&G with a 6.9 percent stake -- has proposed for a conference call with ISS, industry sources said.

IBK, who receives estimated dividends of 35 billion won ($32.5 million) annually, has been making increasing moves to get involved in the firm’s management. Some industry insiders point to how IBK’s sudden shift coincides with policy directions of the current administration. 

ISS, which provides corporate governance and investment solutions, analyzes shareholder agendas of global firms and issues reports on it. Global investors often refer to ISS’s opinion before exercising votes. 

Industry sources said ISS recently agreed to the reappointment of Baek. 

“Although the nomination process for the new CEO took just two days, the overall procedure was transparent and fair. With regard to a case with Indonesian tobacco maker, we have not found serious charges, although the case is currently under Financial Supervisory Service’s investigation,” ISS reportedly said in a statement delivered to shareholders. 

In 2011, KT&G was alleged to be using double bookkeeping after acquiring a 60 percent stake in Indonesia’s sixth-largest tobacco manufacturer Trisakti Purwosari Makmur to become the major shareholder. 

Industry experts viewed that ISS’s standing with KT&G is crucial ahead of the foreign investors' votes and the upcoming shareholders meeting next week.

Currently, foreign investors make up a combined 53 percent of KT&G stakeholders. Most of them, however, are silent partners whose main focus is profitability, rather than actively getting involved in business management. 

The bank has said it will vote against the reappointment of the current chief citing Baek’s alleged double bookkeeping activity and unfair nomination process. It plans to urge other investors, including the largest single shareholder National Pension Service with a 9.09 percent stake ownership, to support its move.

By Kim Da-sol (ddd@heraldcorp.com)