Institutional Shareholder Service, a global proxy advisory firm, has supported Hyundai Motor against its conflict with Elliott over special dividend payouts to shareholders.

ISS said in a statement that it doesn’t support Elliott’s demand to return almost 7 trillion won in excess cash to shareholders through special dividends. It, however, supported two of Elliott’s three nominees for the board. It also showed support for Hyundai’s nomination of Yoon Chi-won, vice chairman of UBS AG’s wealth management division.

ISS’ statement came two days’ after Glass Lewis & Co. stepped up its support for Hyundai in its battle against Elliott over the issue of dividend payouts. 

On Sunday, Glass Lewis encouraged shareholders to vote against the New York-based hedge fund’s proposal for extra cash payments, saying the automaker needs intense investments in research and development for the future. It has also backed Hyundai’s nominees for independent directors. A shareholder vote on the proposal is set for March 22.

ISS, meanwhile, noted the share price of Hyundai and its affiliate Hyundai Mobis were undervalued, blaming it on shortcomings in strategies and operational execution.

“The company’s track record in capital allocation is not comforting, though a reconstituted board might be better able to assess the real capital needs and determine an appropriate level of returns to shareholders going forward,” said ISS.

Elliott had proposed a payout of 21,967 won per share, and recommended three nominees including John Y. Li and Robert Randall MacEwan for the company’s board.

Hyundai has opposed Elliotts’ proposals, instead, vowing to make heavy investments in R&D.

Daishin Economic Research Institute, one of South Korea’s biggest proxy advisory firms, backed Hyundai’s dividend plans and favored the proposed director nominees, according to reports.

By Cho Chung-un (christory@heraldcorp.com)