KT&G CEO Bang Kyung-man, fifth from left, is seated during the annual general meeting of the tobacco maker's shareholders at the company's Human Resources Development Center in Daejeon, Thursday. Courtesy of KT&G

KT&G succeeded in appointing Senior Executive Vice President Bang Kyung-man as its new CEO, Thursday, overcoming opposition from the Industrial Bank of Korea (IBK), its largest shareholder, and the activist fund Flashlight Capital Partners (FCP), as well as from Institutional Shareholder Services, the world's leading proxy adviser.

However, KT&G failed to prevent the appointment of an external director nominee recommended by IBK, who gained more votes than another candidate recommended by KT&G.

During the annual general meeting of shareholders in Daejeon, KT&G's proposal to appoint Bang as the new CEO was passed as he won support from the National Pension Service (NPS), the cigarette firm's second-largest shareholder as well as employees holding company shares.

This is the first time in nine years for KT&G to replace its top management post.

The new chief is also a company insider, just like his predecessors who led KT&G after its privatization in 2002.

Bang, who has held various management positions since joining the company in 1998, was recognized for directing the launch of Esse Change, a brand that has dominated the Korean cigarette market over the past two decades.

"Based on our key businesses, we will become the global top-tier company," he said. "By sharing the fruit of the growth, I will enhance the corporate value and build up trust with various stakeholders, including our shareholders."

The KT&G CEO is expected to face a challenge for a while from Son Dong-hwan, a professor at Sungkyunkwan University Law School, who was recommended by IBK as an external director.

The bank's proposal for his appointment was passed, as the NPS used half of its votes for him under the cumulative voting system, which allows shareholders to cast all of their ballots in favor of a single nominee for the board of directors when a company has multiple openings on its governing board.

In an election for two directors, for example, a shareholder owning 500 shares is given 1,000 votes upfront, and the shareholder can use all 1,000 votes for one candidate or split them, giving 500 votes to each of two candidates.

IBK welcomed Son's appointment, saying that he will contribute to improving KT&G's corporate governance structure.

However, KT&G's union criticized the state-run lender for meddling in the privatized company's management, during a rally held in front of the venue for the shareholders' meeting. The unionized workers claimed that its excessive interference may cause job insecurity.

During the shareholders' meeting, the proposal to appoint lawyer Kwak Sang-wook as an external director serving as an audit committee member was also passed.

"With the new board of directors, we will make more efforts for our company's growth and enhanced shareholder value," a KT&G official said.