Rise of Korean activist investors at home

As the annual general shareholders’ meeting season is approaching fast, publicly traded companies in South Korea are readying for a swath of proposals from activist funds, ranging from calls for changes in management or the board to increased dividend payments.

According to the financial investment industry on Friday, Align Partners Capital Management Inc. on Thursday sent a letter to seven listed financial groups in Korea, demanding that they implement their shareholder-friendly policies announced last year.

The seven institutions include KB Financial Group Inc., Shinhan Financial Group Co., Hana Financial Group Inc., Woori Financial Group Inc., JB Financial Group Co., BNK Financial Group Inc. and DGB Financial Group Co.

“If they fail to fulfill their pledges, we will consider shareholder proposals,” said the Seoul-based private equity firm, which led shareholder activism campaigns that triggered a management dispute at SM Entertainment Co. last year.

A shareholder proposal is a document recommendation or requirement that a shareholder formally submits before a company’s shareholder meeting, advocating the company take a specific course of action.

Earlier this month, Align Partners also delivered a list of new five board director candidates to JB Financial.

VIP Asset Management Co. on Tuesday also changed the purpose of its stake ownership, 5.38%, in Samyang Packaging Corp. in a bid to engage in more aggressive shareholder activism campaigns.

“Samyang Packaging stock is undervalued because the company’s cash dividend-centered shareholder return policy fails to reflect the company’s fair value,” the leading Korean asset manager said.

As shareholders can submit their proposals up until six weeks before publicly traded companies’ general shareholders meetings, which generally take place in March every year, more activist investors are expected to join Align Partners and VIP Asset to wield power against companies, according to market analysts.

NEW WAVE OF SHAREHOLDER ACTIVISM

In recent years more Korean-native activist funds have succeeded in shareholder activism campaigns calling for governance structure improvements.

Baek Bok-in, KT&G Corp.'s longest-serving chief executive officer, decided not to pursue a fourth term, yielding to demands from Flashlight Capital Partners PTE. Ltd.

Hyundai Group Chairwoman Hyun Jeong-eun in November decided to step down from her posts as Hyundai Elevator Co.'s internal director and board chair amid mounting shareholder pressure to improve corporate governance.

In August, KCGI Asset Management, which holds a more than 2% stake in the elevator maker, sent an open letter to the company’s board, urging them to take measures to guarantee long-term profitability and improve governance structure, including the chairwoman’s resignation from the board.

The activist fund will also call on Hyundai Elevator to retire the company’s treasury shares and improve the process of selecting auditors.

Amid the growing influence of activist funds, more and more Korean companies are accepting their demands.

Truston Asset Management Co., which had a proxy battle with Taekwang Industrial Co. last year, has decided not to send any shareholder proposals to the company this year because it is satisfied with the company’s efforts to improve governance with enhanced environmental, social and corporate governance policies.

However, some industry observers said Korean activist funds should increase their focus on campaigns to improve long-term corporate value like their peers in the US and Japan.

“Korean activist funds currently focus more on short-term profit,” said the head of a local asset management company.

Write to Jin-Gyu Maeng at maeng@hankyung.com


Sookyung Seo edited this article.