Weekly ESG Controversies (June 24~30)

Key takeaways

• Competitive Behavior Controversies: The 'Competitive Behavior' category decreased from 22.84% to 13.36%. However, insider trading, collusion, and antitrust investigations have emerged as significant issues.

  
  

• Fire Incident at Hwaseong Lithium Battery Plant: A fire at Aricell’s lithium battery factory, a subsidiary of S-CONNECT, caused 22 fatalities. This incident has surged the 'Employee Health & Safety' category to 11.88% from 5.09%, prompting a Ministry of Employment and Labor investigation under the Severe Accidents Punishment Act.

  
  

• Business Ethics Controversies: BIFIDO is facing a trading halt and potential delisting due to allegations of an 8 billion KRW embezzlement by its head of finance. Meanwhile, Ssangbangwool is embroiled in bribery and illicit remittance controversies related to North Korea.

  
  

• Customer Welfare Controversies: DONGSUNG PHARMACEUTICAL is under scrutiny for significant price discrepancies in its hair dye products between pharmacies and Daiso stores, representing 23.94% of this category's risk. Additionally, the Danish Food Authority has recalled Samyang Foods' Buldak Bokkeum Myeon due to high capsaicin content.

1. Competitive Behavior (13.36%)

• HYBE: Employees indicted for insider trading related to BTS's military enlistment, involving misuse of undisclosed material information.

• DAEWOO ENGINEERING & CONSTRUCTION: Fined for collusive bidding practices involving 20 subcontractors.

• CJ CGV: Under antitrust investigation for alleged price-fixing in collaboration with Lotte Cinema and Megabox.

• SAMSUNG ELECTRONICS: Facing potential EU antitrust investigation over its AI partnership with Google.

• YTN: Controversy over the change in largest shareholder approval process and accusations of collusion.

2. Employee Health & Safety (11.88%)

• S CONNECT: Fire at Aricell’s Hwaseong factory led to 22 deaths and a potential violation of the Serious Accident Punishment Act.

• HD HYUNDAI CONSTRUCTION EQUIPMENT: Illegal dispatch of subcontracted workers to direct production processes, resulting in fines.

3. Business Ethics (9.69%)

• Taekwang Group: Controversy over improper lending practices.

• BIFIDO: Facing delisting crisis due to 8 billion KRW embezzlement.

• YUANTA SECURITIES KOREA: Fined for failure to report branch openings and closures.

• KOREAN DRUG: Involved in illegal rebate practices with inadequate punitive measures.

• SBW: Allegations of bribery and illegal meetings related to North Korea remittance.

4. Customer Welfare (9.24%)

• DONGSUNG PHARMACEUTICAL: Controversy over significant price discrepancies in hair dye products between pharmacies and Daiso stores.

• KOREAN DRUG: Illegal rebate scandal involving monetary incentives for prescribing certain medications.

• SAMYANG FOODS: Recall of Buldak Bokkeum Myeon due to high capsaicin content.

• HYBE: Allegations of plagiarism involving the virtual girl group SYNDI8.

• YTN: Controversy over biased review and legal sanctions related to the 'Biden Insult Controversy' report.

5. Systemic Risk Management (6.09%)

• SAMSUNG ELECTRONICS: Concerns over mass defects in foundry wafers and HBM validation failures.

• YUANTA SECURITIES KOREA: CEO sentenced for selling personal information of investors.

• SK Group: Undergoing comprehensive business portfolio review amid concerns over excessive investments and poor performance in green and bio sectors.

This week's ESG report highlights various emerging risks, with 'Competitive Behavior' controversies taking precedence over previous management issues. The fire at S-CONNECT's subsidiary has significantly raised 'Employee Health & Safety' concerns. Additionally, 'Customer Welfare' issues have resurfaced, particularly with DONGSUNG PHARMACEUTICAL’s price discrepancies. This trend underscores the importance for companies to manage existing risks and respond proactively to emerging threats.

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