Ratio of Participation in Electronic Voting Still Low

Before annual shareholder meetings early this year, securities companies expected more electronic voting in relation to the spread of COVID-19. However, it turned out that shareholders’ participation in electronic voting halved compared to last year.

In the first quarter of this year, only 0.68 percent of shareholders in companies that adopted Korea Securities Depository’s electronic voting system actually participated in electronic voting. The ratio was 1.13 percent in the same period of the previous year. It stood at 0.17 percent in 2015 and remained below 1 percent each year from 2016 to 2018.

Electronic voting was expected to be promoted this year with shareholders refraining from going out due to COVID-19 and companies such as Samsung Electronics, CJ, Hyundai Motor Group and POSCO having introduced electronic voting for the same reason.

According to experts, the still low voting participant ratio is because many of the shareholders are small-scale individual investors not much interested in voting rights. Individual investors’ stock market participation has shown a significant increase this year and they tend not to keep certain stocks for more than three months. Companies with a December fiscal year end finalize their shareholder lists at the end of December and hold shareholder meetings in March, which means shareholders to participate in the meetings and those actually holding shares immediately before the meetings do not match in many cases.

The low participation ratio led to rejected agenda items. The number of listed companies with at least one agenda item rejected at an ordinary shareholder meeting due to an insufficient quorum increased by 152 to 340 this year with electronic voting having been introduced by 288 out of the 340 companies. In other words, active electronic voting introduction has not led to a sufficient quorum and listed companies’ burden related to shareholder meetings is increasing.

In the past, those companies managed to avoid rejection by shadow voting. However, they are complaining that shadow voting was abolished without any alternative three years ago. According to the Korea Listed Companies Association, minority shareholders constitute 80 percent to 90 percent of total shareholders in a number of non-large listed companies and the companies are appealing for their voting. Under the circumstances, experts point out that the voting right limitation to 3 percent applied to the largest shareholders needs to be abolished and majority presence-based shareholder meeting resolutions need to be allowed.