Align Partners: "Urgent Need to Modernize 'K-Shareholder Meetings'... Influence of Shareholder Proposals Continues to Grow"

"With KOSPI Approaching 8,000, Outdated Shareholder Meeting Rules Must Be Reformed"
Strengthening the Standards for Overseas Proxy Advisory Firm Recommendations Needed

This year, at regular general meetings of shareholders held by domestic companies, the number of shareholder proposals increased significantly, but the actual approval rate remained low. In contrast, amendments to articles of incorporation that could strengthen the influence of controlling shareholders passed with high approval rates, highlighting that the chronic issues of so-called 'K-Shareholder Meetings' persist.

On June 18, Align Partners Asset Management stated, "An analysis of the results of this year's regular general meetings of shareholders shows that the current system still does not sufficiently protect the rights and interests of ordinary shareholders in domestic companies."

According to Align Partners, 56 companies submitted shareholder proposals at this year’s regular general meetings, with a total of 218 agenda items, a significant increase from the previous year (39 companies, 151 items). However, the overall approval rate stood at just 11% (23 items). In the case of proposals submitted by institutional investors, 14 out of 69 items were approved, resulting in a 20% approval rate. There were also successful board member appointment proposals at companies such as DB Insurance, Gabia, Korea Zinc, and Samyoung Electronics.

Notably, there was strong support from ordinary shareholders. Even for proposals that were rejected, in many cases—such as at DB Insurance, Coway, and LG Chem—more than half of ordinary shareholders, excluding the controlling shareholders, were in favor. The average approval rate among ordinary shareholders for proposals submitted by institutional investors reached 67.5%.

On the other hand, amendments to articles of incorporation suspected to undermine the intent of the revised Commercial Act were approved with high rates of support. Agenda items that could be used to strengthen the control of majority shareholders—including flexible board member terms, reduction in the number of directors, and allowing disposal of treasury shares for management purposes—were tabled at many KOSPI200 companies and showed high approval rates of 92% to 100%.

Align Partners stressed the need to refine standards in consideration of the revised Commercial Act and the unique characteristics of domestic corporate governance. Unlike domestic institutions such as the National Pension Service (approval rate of 69%) and the domestic advisory firm average (67%), overseas advisory firms such as ISS recommended approval for only 26% of shareholder proposals. In particular, for problematic amendments to articles of incorporation, these overseas advisory firms actually gave higher approval recommendation rates than their domestic counterparts.

Changhwan Lee, CEO of Align Partners, said, "Despite reforms to the Commercial Act and ambitions for capital market reform, it is disappointing that proposals detrimental to shareholder value continue to pass with high approval rates. Improvements are needed, such as making recommendations from overseas proxy advisory firms more substantive, extending the notice period for shareholder meetings, spreading out meeting dates, and institutionalizing non-binding shareholder proposals."

This content was produced with the assistance of AI translation services.