The author is an analyst for NH Investment & Securities. He can be reached at dongyang.kim@nhqv.com -- Ed.
At AGMs this year, the spread of shareholder proposals, which has been a global trend since 2023, is to continue. As Korea’s dividend system improvements roll out in earnest, more companies are to amend their articles of incorporation. But, with the Commercial Act amendment for online meetings of shareholders pending in the National Assembly, online meetings are to appear for AGMs from 2025 at the earliest.
Spread of shareholder proposals and full-fledged change of articles of incorporation to improve dividend system
The expansion of shareholder proposals by activist funds is expected to continue. The number of companies receiving shareholder proposals and the number of shareholder proposals in 2023 upped by 41% and 26%, respectively, compared to the average of the previous two years. The shareholder proposal approval rate also climbed to 20.2% (+14.6%p y-y). Open letters, a preliminary step to shareholder proposals, also showed an increase. According to GSIA statistics, the main approach to sustainable investment changed from negative screening (until 2018) to ESG integration (2020), and then to shareholder engagement activities (2022), a more active form of investment.
From end-2023, improvements to the dividend system (dividend amount confirmed before determination of dividend record date) have been applied in earnest (up to 796 companies). However, 66% of all listed companies still need to change their articles of incorporation to improve their dividend system. In a survey by the Korea Listed Companies Association (KLCA), 18.3% of companies announced plans to change their articles of incorporation at their 2024 annual general meeting (AGM).
Delayed introduction of online AGM
Since Covid-19, some companies have attempted the online broadcasting and answering of shareholder questions at shareholders’ meetings. However, we note that online attendance and electronic voting on the day of the general shareholders’ meeting have no legal effect. In Japan, online meetings are spreading following revision of the relevant law. In 2023, there were 395 companies that held hybrid meetings of shareholders, and 6 companies held online shareholders’ meetings. In Korea, in order to introduce virtual shareholders’ meetings, it is necessary to amend the Commercial Code and change the articles of incorporation of individual companies. However, the introduction of online meetings of shareholders in the future should boost participation in shareholders’ meetings and trim corporate costs.