Below are key takeaways from ISS’ recently released 2021 South Korea Proxy Season Preview. The full report is available to institutional subscribers by logging into ProxyExchange then selecting the Governance Exchange and its Report Center tab and to corporate subscribers by logging into Governance Analytics then selecting the Governance Exchange and the Report Center tab.
- 2021 Korea proxy season is expected to remain concentrated in late March. Specific regulatory relief or restrictions on AGMs have not been announced amid the third wave of coronavirus pandemic; however, many Korean companies are expected to take measures such as holding a virtual meeting in addition to physical in-person AGMs. More high-profile meetings are expected mainly due to the on-going restructuring of Chaebol groups accelerated by the latest regulatory developments.
- The National Assembly passed the controversial bill on the “three acts for a fair economy”. Despite strong opposition from the business community, the bill strictly aims to strengthen the rights of the minority shareholders and curb family entrenchment among Chaebol groups. Major amendments have been made in the Commercial Act and the Monopoly Regulation and Fair Trade Act. In this season, the amended independent nomination of the audit committee members takes effect.
- Major revisions in the Monopoly Regulation and Fair Trade Act triggered group-level restructuring plans involving a merger, spin-off, split-off, and formation of an (intermediary) holding company. As opposed to the past generally more accepting behavior, more minority shareholders vocally expressed their concerns in 2020 by submitting shareholder’s letters, petitioning to the Blue House, and exercising opposition votes. Ahead of their proposed restructuring plans, major Chaebol groups initiated salient share repurchases in 2020. Treasury shares have been used as a tool for entrenchment in Korea, as the board typically keeps the repurchased stocks uncancelled. Related to restructures, more high-profile resolutions are coming up in 2021 proxy season.
- In July 2020, the Ministry of Economy and Finance announced a landmark ‘Green New Deal’. The bill aimed to invest in projects to meet the net-zero carbon emission vision. After the announcement of the massive Green New Deal, environmental pressure on Korean companies has been growing, as shown by global investor concern over Korean companies’ overseas coal financing activities. For the first time, shareholders collectively raised strong concerns on an environmental issue to public company (Samsung C&T and Korea Electric Power Corp).
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