[Jong Hyuk Lee's Investment]Next Year's Shareholder Meetings Set to Be Dominated by 'Funds'

(Seoul=Yonhap Infomax)

South Korea's benchmark KOSPI index has surpassed the 4,000 mark for the first time in 45 years, making it the world's top-performing equity market this year with a gain of over 60%.

While increased investment in artificial intelligence (AI) and abundant global liquidity have been cited as key drivers, corporate governance reforms spearheaded by the Lee Jae-myung administration have also played a significant role. In July, the first amendment to the Commercial Act—targeting controlling shareholders who infringe on minority shareholder rights—passed the National Assembly. This was followed in August by a second amendment mandating cumulative voting and expanding separate election of audit committee members. A third amendment, which would require companies to cancel treasury shares, is currently under consideration.

Shareholder return initiatives are expected to intensify going forward. Overseas funds are increasingly engaging in shareholder activism. Recently, UK-based hedge fund Palliser Capital made a public proposal, while Singapore-based asset manager Metrica sent letters to LG Chem Ltd. shareholders, urging more active involvement. Palliser Capital called for board restructuring and share buybacks using LG Energy Solution Ltd. holdings. Metrica criticized LG Chem's "suboptimal structure," citing excessive ownership of LG Energy Solution and failure to create value for LG Chem shareholders.

Historically, activist funds were seen as primarily foreign, but domestic activist funds are on the rise, and joint ventures between local and global funds are expected to emerge. In the first half of this year, the National Pension Service (NPS), South Korea's largest institutional investor, designated LG Chem as a priority management target, issuing a warning to the company. Activist funds are intensifying efforts to gain board seats, which is expected to improve corporate governance, enhance minority shareholder rights, and ultimately support share prices. However, for companies, this trend is a growing source of concern.

Companies will increasingly receive shareholder letters and must respond by disclosing value-up plans to the market. Firms that fail to proactively enhance corporate value risk becoming targets for activist funds. Conversely, companies that take the initiative in presenting robust shareholder return and value enhancement strategies may win market support. This is also beneficial for companies, as optimizing capital and divesting non-core assets naturally streamlines business portfolios.

Although the KOSPI has surged more than 60% this year, since September, gains have been overwhelmingly driven by Samsung Electronics Co., South Korea's largest company by market value, and SK hynix Inc. Funds with limited exposure to these stocks have experienced relative underperformance, fueling further demands for shareholder returns from both domestic and international funds. As a result, there may be a rise in stealth stake acquisitions by funds, often without companies' prior knowledge. Next year's shareholder meetings are expected to look markedly different from previous years. (Digital Newsroom Chief)

liberte@yna.co.kr

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