Below are key takeaways from ISS’ recently released 2024 Proxy Season Preview – South Korea. 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.
- The tone of good governance in Korea has taken an upturn in light of regulatory support and burgeoning shareholder activism. At the same time, changes at the Federation of Korean Industries (or FKI) could be viewed as a step in the other direction, as major Chaebols groups who were ousted on corruptive lobbying activities resumed their memberships in the FKI. Increasingly, joint forces between the Presidential cabinet and the top business leaders have been witnessed, bringing back a cautionary note on governance concerns from the past.
- Meanwhile, the strengthened ISS benchmark policy on governance failures implemented in 2019 has continued to raise awareness on some of the chronic governance concerns still prevalent in Korea. A number of minority shareholders have increasingly and collectively urged boards to address governance failures. Concurrently, some institutional shareholders have proactively expressed opposition to director candidates with a record of governance failure. Some of the directors concerned may be (re)nominated in upcoming AGMs.
- Rising shareholder activism is expected to continue in 2024. Throughout 2023, a coalition of various stakeholders including investors, financial watchdogs, and legal professionals continued to urge boards and regulators to address the “governance” valuation discount as a result of market dynamics favoring the majority shareholders’ interests. In 2023, the collective interest brought an unprecedented rise of shareholder activism in Korea, with the number of Korean companies receiving a shareholder proposals, up 30.3 percent on 2022. A similar level of shareholder activism and contentious meetings is expected in 2024 AGM season.
- E&S focused shareholder campaigns have not been seen. Environmental and social issues are working their way more into corporate disclosures and engagement activities in Korea. However, governance remains at the center of discussions and E&S topics are generally discussed in conjunction with governance issues. Although a shareholder area of focus in some other markets, political spending campaigns have not appeared despite historical ties between the government and business groups.
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By: Candice Kim, Jieun Chang, Jaesung Lee