Influence of Activism Expected to Strengthen at Shareholders’ Meetings in Korea
- seoultribune
- 1월 27일
- 2분 분량
The influence of activism is expected to grow stronger at this year’s shareholders’ meetings. With amendments to the Commercial Act aiming to strengthen the rights of minority shareholders, expectations are high for institutional support. Activist funds are increasingly pressuring companies, demanding improved shareholder return policies, enhanced board independence, and even filing shareholder derivative lawsuits.
Coway Faces Conflict with Align Partners Over Dividend Payout Ratio
Coway announced that it would "review the legality of shareholder proposals and reflect them in the agenda of the shareholders' meeting." Align Partners, an activist fund, urged Coway to improve its capital structure and increase its dividend payout ratio from the current 40% to as high as 90%. The fund also raised concerns about the influence of Netmarble, the largest shareholder, on Coway’s board and called for measures to enhance board independence. Coway took a cautious stance, stating that the proposal of a KRW 7,000 per share cash dividend by Align Partners would be decided after a board review.
KT&G Faces Shareholder Derivative Lawsuit
Flashlight Capital Partners (FCP) filed a shareholder derivative lawsuit against KT&G, alleging that the company’s previous board improperly disposed of treasury shares, causing a loss of approximately KRW 1 trillion. KT&G countered these claims, asserting that all procedures were lawfully conducted and dismissing FCP’s accusations as baseless. The company has already retired some treasury shares and announced plans for additional retirements.
ESG Research Institute Predicts Increased Shareholder Activism
The ESG Research Institute forecasts heightened shareholder activism from both activist investors and individual shareholders at this year’s meetings. The number of shareholder proposals has steadily increased over the past three years, with 41 companies and 154 proposals discussed last year. The institute updated its guidelines to prioritize long-term shareholder value and expressed opposition to actions, such as issuing new shares solely for defending management control.
Controversy Over Amendments to the Commercial Act
The proposed amendments to the Commercial Act, which aim to expand directors' fiduciary duty from the company to shareholders, are currently under debate in the National Assembly. While the opposition party strongly supports the amendments to protect minority shareholders, the business community and the ruling party oppose them, citing misalignment with global standards. A survey of foreign law professors revealed that 68% believe fiduciary duty should remain limited to the company. Concerns were raised that expanding fiduciary duty could undermine corporate management and introduce unpredictable risks.
Business Community Opposes Amendments, Citing Global Standards
The Federation of Korean Industries (FKI) argued that expanding fiduciary duty would lead to an increase in lawsuits and discourage investments. Some experts also warned that Korean companies could become prime targets for activist investors.
The intensifying activism and ongoing debates over amendments to the Commercial Act are expected to make this year’s shareholders’ meetings more contentious than ever before.
Seoul Tribune (c)
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