Becoming an ‘advanced country’ isn’t all roses, Korean firms discover

While the proxy contest between Samsung and Elliott Associates dominated Korea’s headlines, the United States was the arena for another high-profile battle, one between the chemical giant DuPont and Trian Fund Management.

Trian sought to take control of DuPont’s board of directors, urging shareholders to oust some sitting board members. But DuPont narrowly defeated the campaign; smaller investors backed the company.

The two highly-publicized battles are part of a growing number of shareholder revolts recently.

Aggressive hedge funds have increased in number in the last ten years, PricewaterhouseCoopers says. The accounting firm found 275 new activist hedge funds around the world from 2003 to May, 2014, with more than $100 billion in managed assets.

This year was a particularly active one for agitation by institutional shareholders.

Three hundred companies faced demands from such shareholders during the first half of this year, according to the research publication Activist Insight and the law firm Olshan Frome Wolosky. The figure was an increase of 23 percent from the record number during the same period last year.

Although Korea was unsettled by Elliott’s onslaught on the country’s largest conglomerate, other parts of the world are more used to such activism.

The United States saw the highest number of campaigns, 216, and there were another 31.

Some of the targeted companies in the U.S. included Procter & Gamble, Apple, Microsoft and Netflix.

Asia traditionally has been faced with fewer such boardroom battles. This year, there have been only 10 examples. While that is a relatively small number, companies here saw only 14 attacks last year, a record that seems likely to be overtaken by the end of 2015. The six-month record matches the total number of campaigns that took place in the region in the three years from 2012 to 2014.

Globally, the researchers said they expected this year’s shareholder challenges to reach 500, up from the 417 instances last year.

One reason that so many investors have turned into activists may be that companies often capitulate to demands of activist shareholders, either out of a desire to avoid a battle or because management realizes they are defending a shaky record.

Overall, activists in 2014 were successful nearly 75 percent of the time in getting companies to bow to at least some of the changes sought by activist sharehodlers, Active Insight reported.

The same report also looked at trends in investor activism, noting that shareholders don’t always pay heed to the advice of proxy advisory firms such as Institutional Shareholder Services or Glass Lewis, though their influence is strong with institutional investors. Both at Samsung and at DuPont, shareholders voted against the advice of those advisory services. But overall, institutional investors sided with ISS 91 percent of the time and with Glass Lewis 94 percent of the time.

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