Chaebol brace for shareholder showdown

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Chaebol brace for shareholder showdown


This month is high season for shareholders, when most Korean conglomerates hold their annual general meeting (AGM). While many companies are making an effort to improve investor rights, they are also bracing for a showdown with shareholders over key issues like director appointments.

Samsung Electronics, Korea’s No. 1 firm by market capitalization, is holding its AGM on March 23. Two of the most important issues on the table for the electronics giant are the approval of new independent directors - including a foreigner and a woman - and a 50-to-1 stock split to make Samsung shares more affordable for potential investors. The newly split stocks will be listed on the market from May 16 if they go through.

The highlight of the meeting will be Vice Chairman Lee Jae-yong announcing the future management direction and corporate governance restructuring - if he decides to attend.

The group’s heir apparent has kept a low profile after being released from prison on appeal last month. Lee didn’t show up at the PyeongChang Winter Olympics in February, where he was highly anticipated to make his first public appearance since leaving jail. He also failed to attend a board meeting and a cornerstone laying ceremony for a new chip factory last month.

Several subsidiaries of Hyundai Motor held their AGMs on Friday. In an unprecedented move for the auto maker, Hyundai Glovis, the group’s logistics affiliate, appointed an independent director nominated by shareholders to oversee the protection of investor rights.

SK, in line with its efforts to lead the country on the technological front, is implementing an electronic voting system to allow shareholders to have their say even if they’re not physically present at the meetings. The third-largest conglomerate also scheduled the AGMs of its different subsidiaries on separate dates to accommodate investors who have stakes in more than one of the group’s offshoots, a practice that Hanhwa, CJ and energy conglomerate LS Group have also taken up.

In its shareholders’ meeting slated for March 23, KT will discuss the possible revision of its articles of association to contain external pressure and prevent unfair practices like hiring through connections. Construction giant Daelim and Hyundai Department Store will deliberate on forming new committees dedicated to increasing management transparency, while SK’s petrochemical arm SKC will review the adoption of interim dividends.

“The government is putting greater pressure on improving corporate governance and rooting out unfair internal practices,” one senior executive of a conglomerate explained, “and small shareholders voices’ are growing louder.”

“Developments like companies adopting the stewardship code to encourage institutional investors to exercise voting rights and the abolition of shadow voting, which is leading firms to fail to meet the quorum, are helping to change the style of the meetings.”

KB Financial Group’s AGM, scheduled for March 23, promises to be feisty. Shareholders will be voting on labor union proposals that KB’s board of directors had previously shot down, which include revising the articles of association to limit the appointment of political figures as directors and appointing an independent director nominated by the union.

KT&G, Korea’s largest tobacco manufacturer, reappointed incumbent CEO Baek Bok-in for another three years in its AGM Friday, overcoming opposition from the Industrial Bank of Korea, its second largest shareholder.

The two largest shareholders - the National Pension Service and the Industrial Bank of Korea, each holding 9.09 and 6.93 percent - had reservations about Baek due to allegations that he was involved in fraudulent accounting during KT&G’s acquirement of an Indonesian tobacco company in 2011. Foreign investors, who own more than half of KT&G shares, wanted Baek as CEO longer, pleased with the company’s performance since he took office in 2015. They were also encouraged by the International Shareholder Services, the world’s largest proxy advisory firm.

The pension service, however, announced a day before the meeting that it had decided to cast a neutral vote on the matter, facilitating Baek’s reappointment. It cited the lack of factual evidence backing allegations against him.

Smaller companies are also clamping down for a battle of votes in their meetings. Gas distributor Samchully and steel manufacturer Kisco Holdings are preparing to face demands from institutional investors to dramatically increase stock dividends, while underwear company BYC and battery maker Atlas BX will fight shareholders over requests to appoint an auditing director, expand dividends and split shares.

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