Institutional Investors Embrace Shareholder Activism
Korean institutional investors are scrambling to introduce the stewardship code which requires them to implement their fiduciary duties.
The number of asset management firms, private equity funds and securities firms which adopted the stewardship code as of June 13 totaled 97, according to the data from the Korea Corporate Governance Service (KCGS). The figure increased from 18 in 2017 to 75 at the end of 2018. This year, 22 more companies already joined and 33 more firms are about to follow suit. Accordingly, the number is expected to exceed 100 in the near future.
The rush to introduce the stewardship code has been led by pension funds which are big investors in the domestic market. Tangible results from the recent active shareholder intervention are also fueling the boom. The National Pension Service (NPS) has already adopted the code and other major pension funds have announced plans to do so this year. An official from an asset management firm said, “Introducing the stewardship code helps asset management companies win contracts from pension funds and state-run banks to manage their assets. This is why many firms have adopted the code since last year.”
Recently, active shareholder intervention has led to a rise in share prices of such companies as Hanjin KAL, SM and Glofzon. Asset managers can exercise their shareholder’s rights anytime regardless of whether they have introduced the stewardship code. But they can act more freely if they have officially adopted it.
Industry analysts expect that more and more institutions will raise their voices to boost the value of their shareholdings in the second half of the year. Institutions look to make more profits through expanded dividend payouts and improvement of governance structure as the domestic stock market drift sideways.
A CEO of an asset management company said, “With the absence of leading growth industries, asset management firms have no choice but to embrace strategies that boost stock prices through shareholder friendly policy, including the expansion of dividends.”