Retail investors are gearing up to assert their demands for higher returns at the upcoming annual shareholders’ meetings of major financial groups in South Korea. This move comes in the wake of a government initiative aimed at boosting investment returns to address the persistent undervaluation of Korean shares compared to global counterparts. The Corporate Value-up Program, introduced in February, aims to tackle the “Korea discount” phenomenon, while activist funds are ramping up pressure on listed firms to bolster shareholders’ voting rights.
Activist funds, known for prioritizing retail investors’ rights, are intensifying efforts to increase their ownership stakes in listed firms. Meritz Securities analyst Cho Ah-hae views the 2024 shareholders’ meetings as a potential turning point for retail investors to have their voices heard after years of feeling marginalized.
Three of the country’s four largest financial groups — KB, Hana, and Woori — are slated to hold their shareholders’ meetings on March 22. Meanwhile, Shinhan will convene its board of directors to determine the meeting date within the same month. These firms, listed on the benchmark KOSPI, have long been unattractive to investors due to their price-to-book ratio (PBR) remaining below 1 for an extended period. A PBR below 1 suggests that the stock may be trading below its fair value.
Despite efforts to entice investors by increasing dividend payout ratios, from 29.05 percent in 2022 to 35.05 percent in 2023, retail investors remain unsatisfied. Kim Kyu-shik, chairman of the Korean Corporate Governance Forum, notes that retail investors are likely to demand even greater returns this year. Align Partners, a Seoul-based activist fund, has been at the forefront of advocating for substantial returns, calling for financial groups to distribute up to 50 percent of their net income to shareholders.
Align Partners has also pushed for granting multiple voting rights for each shareholder in the selection of board directors, aiming to establish a more investor-friendly board. Currently, each shareholder is only granted a single voting right, but Align Partners seeks to align this with the total number of board directors. This move underscores the growing influence of activist funds in shaping corporate governance practices in South Korea’s financial sector.