FSC urges companies to adopt electronic voting

Choi Jong-ku, chairman of the Financial Services Commission, speaks at a media briefing on Wednesday. [YONHAP]

The head of Korea’s financial regulatory agency said Wednesday that the industry should ditch its practice of holding annual stockholder meetings on the same day, which he said prevents smaller investors from properly exercising their shareholder rights.

In March, many companies hold their shareholder meetings on the same day, giving rise to the phrase “Super Shareholders’ Day.”

“The number of listed companies holding shareholder meetings on March 24 was 924,” said Choi Jong-ku, chairman of the Financial Services Commission, “which represented 45 percent of all listed companies,”

In 2014, 73 percent of listed companies held shareholder meetings on three specific days, while 6.4 percent of British companies did so and 10.3 percent of American companies did the same, according to Choi. The commission chairman encouraged financial companies to embrace a mobile electronic voting system where investors can cast their votes without physically attending meetings.

“We are considering incorporating online voting into the electronic disclosure site or trading system operated by brokerages in order to provide better access for minority shareholders,” Choi said.

The electronic voting system has been around for years, but companies have not been actively adopting it.

Currently, 46 percent of Kospi-listed companies and 64 percent of Kosdaq companies use the electronic voting system. But the actual rate of voting on the system remains far lower, at 0.21 percent of all listed companies. Choi also vowed to deal with the absence of a shadow voting system that is due to end this year.

Shadow voting, or mirror voting, is a proxy voting procedure exercised by the Korea Securities Depository on behalf of shareholders in proportion to a “pro and con ratio” realized at the shareholders meeting. The depository votes in the same proportion as voters who participated in an annual shareholder meeting.

The measure was adopted in 1992 to fill quorum at a shareholder meeting in case of insufficient attendance. However, it has been criticized for the possibility of being abused by large shareholders to undermine the power of smaller investors.

Choi said companies would not face delisting if they failed to meet quorum without shadow voting, though the regulator will put the companies on a watch list.

The chairman cited SK Group for setting a good precedent using an electronic voting system at its shareholder meetings.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]