Shareholder Proposals Rejected One After Another

Shareholder activism is not strong enough to carry the day in this year's proxy season.

Minority shareholders and institutional investors of major Korean companies have recently suffered a setback as their shareholder proposals have been rejected one after another at general shareholders’ meetings. The National Pension Service (NPS), which declared its determination to actively exercise its voting rights, also lost proxy battles. “Shareholder activism” seems to have failed to get the start on majority shareholders of major companies in the initial period of this year’s proxy season.

Minority shareholders of POSCO Coated & Color Steel Co. (POSCO C&C) proposed a partial amendment of articles of association to increase the total number of shares issued from the current 16 million to 160 million through a 10:1 stock split but the proposal was voted down at the regular general meeting held on March 18, according to the Financial Supervisory Service (FSS) and the Korea Exchange (KRX) on March 19. Minority shareholders made the same proposal this year again after 2016, saying, “The share price needs to be raised by increasing the trading volume through a stock split.” However, they failed to win more than two-thirds of attendee ballots, which was required for a special resolution. As POSCO, the largest shareholder of POSCO C&C, owns a 56.87 percent stake in the firm and minority shareholders hold only a 26.97 percent stake, the minority shareholders needed the support of Shinyoung Asset Management with a 7.94 percent stake and the NPS with a 6.97 percent stake, but they failed to secure it.

The NPS, which introduced a stewardship code last year, also saw all the items on the agenda that it disapproved of pass the shareholders meetings. The NPS voted against the items proposed by the management of Shinsegae, Hanmi Pharmaceutical, Hyundai Engineering & Construction and Nongshim, saying that their outside directors or auditors would not be able to play their roles properly because the companies excluded the concentrated vote system without any valid reason. However, it failed to get other shareholders’ consent. In addition, Suheung, Hyundai Wia, Poongsan and LG International raised director compensation despite the NPS’ opposition.


However, a majority of experts say that it is too early to judge the success or failure of “shareholder activism” this year as the proxy season has just begun. A number of listed companies, which are preparing for a vote battle with minority shareholders, will hold the shareholders’ meeting this week and next month.

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