[비즈한국] IT and engineering firm POSCO DX has become the first POSCO Group affiliate to be designated as an "unfaithful disclosure corporation." As a decline in market trust is inevitable, this development could negatively impact the company's G (Governance) rating. The ESG (Environmental, Social, and Governance) management efforts that the company has emphasized are now at risk of being undermined.
The company's efforts to practice ESG (Environmental, Social, and Governance) management are at risk of being undermined as concerns grow over a decline in market trust following POSCO DX's designation as an unfaithful disclosure corporation. Cover of the POSCO DX 2024 Sustainability Report. Photo = POSCO DX website.
According to the Financial Supervisory Service's Data Analysis, Retrieval and Transfer System (DART) on the 2nd, the Korea Exchange's Stock Market Division designated POSCO DX as an unfaithful disclosure corporation on the 28th of last month due to a failure to fulfill disclosure requirements. This was because the company only disclosed the fact that it had signed a smart factory automation system supply contract with Canadian cathode material firm Ultium CAM on April 30th, on the 8th of last month. While there were no penalty points, a fine of 8 million won was imposed.
The holding company, POSCO Holdings005490, is considered to have established a systematic disclosure management system, having been selected as a '2024 KOSPI Outstanding Disclosure Corporation' this past February. Against this backdrop, it is noted that its affiliate, POSCO DX, has become the first in the group to be designated as an unfaithful disclosure corporation.
Designation as an unfaithful disclosure corporation is considered a serious issue that undermines a company's management transparency. This is because critical information that a company is required to disclose is not made public in a timely manner, which can lead to the infringement of investor and shareholder value.
For POSCO DX, which has consistently worked hard on implementing ESG management, the situation raises concerns about a potential downgrade in its ESG rating. In July, the Korea Institute of Corporate Governance and Sustainability (KCGS) adjusted the ESG ratings of 12 companies downward. Among them, the reason for Korea Investment & Securities' adjustment was the occurrence of Financial Supervisory Service sanctions and disclosure violations or inadequate disclosures.
If an ESG rating drops, investment from institutional investors or overseas funds that prioritize ESG performance may decrease. Additionally, the company could face unfavorable conditions, such as higher interest rates when raising capital due to lowered credibility. Recently, global companies have even reduced transactions with or excluded suppliers from their supply chains if their ESG ratings are low.
POSCO DX has been publishing sustainability reports annually since 2021 to disclose its ESG management achievements. With "GREEN"—representing eco-friendly future materials—as its keyword, the company has established five major ESG strategies covering Environment (E), Social (S), and Governance (G), and is currently implementing tasks for each priority area. Its KCGS rating also improved from B+ (Good) in 2020 to A (Excellent) in 2021 and has maintained an A rating until last year.
In the POSCO Group, a representative example of a company with "widely held ownership" and no single controlling shareholder, the importance of ESG management is significant. Currently, among the top 10 domestic groups, only the POSCO Group is managed by professional executives without an owner family. Because multiple shareholders hold stakes, ensuring management transparency is vital for sustainable management. Since the tenure of former Chairman Choi Jeong-woo, the POSCO Group has emphasized ESG management and managed its performance at the group level.
Within POSCO DX, voices are pointing to weak internal controls regarding this designation. On the employee community app Blind, posts have appeared such as, "I cannot understand how there can be a delay of over three months in disclosure when there is a dedicated organization for it," and "It is even more problematic that there are no measures taken after the company suffered such a loss." The employees who wrote the posts urged the disciplining of the person responsible for disclosures, the preparation of measures to restore external trust, and the announcement of plans to prevent recurrence. Some employees expressed dissatisfaction, saying, "The audit team at POSCO DX is at an unbelievable level, so the Holdings audit office needs to take action." When asked about future plans, a POSCO DX official only replied, "Nothing has been concluded yet, and we will handle it according to regulations."
The possibility has been raised that POSCO DX’s designation as an unfaithful disclosure corporation could negatively affect the credibility of the entire POSCO Group, which is currently facing various difficulties both internally and externally. Concerns over "POSCO passing" are growing, as POSCO Holdings Chairman Jang In-hwa was excluded from President Yoon Suk-yeol's delegation to the U.S. Previously, the company was rebuked by the President following a worker fatality at a POSCO E&C worksite. The POSCO Group is struggling to change the atmosphere, including the resignation of CEO Jung Hee-min and the appointment of Song Chi-young, the head of the POSCO Holdings Safety Special Diagnosis TF, as the new CEO.