Major Shareholder 국민연금 at the General Meeting of Shareholders: Will It Shake Up the Board?

Entering Super Week Next Week... Companies on Edge
1523 Listed Companies Holding Meetings
On the 27th, 670 Companies Including HanjinKal and LG to Face National Pension Service Voting Rights
Hanjin Group's 2.9% Stake Emerges as a Key Factor in Management Dispute
Shinhan Financial Group and Woori Financial Chairmen Announce Opposition to Internal Director Appointments

[Asia Economy Reporters Jihwan Park, Minji Lee] Regular shareholder meetings of listed companies are concentrated next week. A total of 1,523 shareholder meetings are scheduled. On the 27th alone, 670 companies including Hanjin KAL, Naver, Lotte Holdings, LG, and GS will hold shareholder meetings, marking a 'Super Shareholders' Meeting Day.' This year's shareholder meetings have drawn the greatest attention to the voice of the National Pension Service (NPS) regarding changes in the atmosphere of shareholder meetings due to the COVID-19 pandemic and issues such as management disputes or director appointments at individual companies.

According to the business community on the 20th, this year's shareholder meeting season is focused on the voting rights exercise of the 'big player,' the National Pension Service. Following the introduction of the Stewardship Code (guidelines for institutional investors' exercise of voting rights), the NPS can demand not only improvements in corporate governance but also shareholder return measures such as dividends. On the 7th of this month, the NPS changed the purpose of stock holdings for 56 companies from 'simple investment' to 'general investment,' which allows involvement in dividends or governance improvements. Major conglomerates such as Samsung Electronics, SK Hynix, Hyundai Motor, and Korean Air were included in large numbers. In nine companies including POSCO, KT&G, and Shinhan Financial Group, the NPS is the largest shareholder. Companies are now in a situation where they can be significantly influenced by the NPS.

The place attracting the most attention regarding the NPS's exercise of voting rights next week is undoubtedly the Hanjin Group. Hanjin KAL, the holding company of Hanjin Group, and the shareholder coalition (KCGI, Bando Construction, and former Korean Air Vice President Cho Hyun-ah) are expected to engage in a fierce vote battle over management rights at the shareholder meeting on the 27th. The NPS, holding a 2.9% stake, has decided to exercise its voting rights directly at the Hanjin KAL regular shareholder meeting, emerging as a variable in the final management dispute. Currently, the three-party coalition holds 31.98% of Hanjin KAL shares with voting rights, which is only 1.47 percentage points less than Chairman Cho Won-tae's friendly shares of 33.45%. However, in the business community, the weight of the management dispute is considered to have tilted toward Chairman Cho Won-tae. Influential domestic and international voting advisory firms such as ISS and KCGS, which advise the NPS on voting rights, have supported Chairman Cho Won-tae. Additionally, global partners, Korean Air employees, and labor unions have sided with Chairman Cho Won-tae.

The NPS's decision to exercise opposing voting rights on the appointment of inside directors Cho Yong-byeong and Sohn Tae-seung at the Shinhan Financial Group and Woori Financial Group shareholder meetings is also a major point of interest. The NPS judged that both candidates have histories of damaging corporate value or infringing on shareholder rights. The NPS holds a 9.76% stake in Shinhan Financial Group, making it the largest shareholder, and is the second-largest shareholder in Woori Financial Group (8.82%) following the Korea Deposit Insurance Corporation (17.25%).

Other companies to watch ahead of the shareholder meetings on the 27th include Daelim Industrial and SM Entertainment. Both companies have significant capacity to pay dividends considering financial soundness, free cash flow, and cash holdings, but their dividend payout ratios and dividend yields are lower compared to other industries. Daelim Industrial's dividend payout ratio was 10% in 2018, while the industry average was about 17%. SM Entertainment currently does not pay dividends and received a shareholder letter from KB Asset Management last year.

The appointment of inside directors is a key agenda item at the Hyundai Department Store and Lotte Shopping shareholder meetings. The reappointment of Chung Ji-sun, Chairman of Hyundai Department Store Group, is a hot topic. Major voting advisory firms view that if reappointed, Chung Ji-sun would simultaneously serve as a registered executive at Hyundai Department Store and Hyundai Green Food, raising concerns about conflicts of interest.

At the KT&G shareholder meeting on the 30th, which is embroiled in an accounting fraud controversy, the NPS, as the largest shareholder (11.01%), is raising its voice. On the 4th, the Financial Supervisory Service concluded that KT&G deliberately violated accounting standards related to the Indonesian tobacco company Trisakti, acquired in 2011. The Financial Supervisory Service has notified KT&G of severe disciplinary actions including referral to the prosecution and recommendations for executive dismissal.

This year's shareholder meetings have also seen the spread of the 'Untact' (non-face-to-face) trend due to the COVID-19 pandemic. Many companies are encouraging electronic voting to minimize person-to-person contact rather than on-site attendance. If electronic voting is not conducted or on-site attendance is unavoidable, mask-wearing is mandatory, making the shareholder meeting scenes distinctly different from before. In addition, extensive quarantine measures such as disinfection, temperature checks using thermal cameras, and spaced seating are being implemented. Some companies plan to live-stream shareholder meetings online. SK Telecom will broadcast its regular shareholder meeting live online on the 26th. The CEO and other executives will answer shareholders' questions online from the venue.

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