From Demands for Shareholder Returns to Management Disputes... Activist Small Shareholders on the Rise

Helixmith Board Composition Dispute
Proxy Battle at General Meeting
LabGenomics Demands Shareholder Returns
Hanmi Pharm Faces Lawsuit Over 'Delayed Disclosure'

[Asia Economy Reporter Lee Gwan-ju] As the shareholder meeting season arrives for pharmaceutical and biotech companies, activism among minority shareholders has ignited. Minority shareholders are actively exercising their shareholder rights, and in some companies, this has escalated into management disputes, heightening tensions ahead of the general meetings.

◇Helixmith’s Shareholder Meeting Vote Battle Anticipated= According to the pharmaceutical and biotech industry on the 25th, Helixmith, which is holding its shareholder meeting on the 31st, is engaged in a management dispute with minority shareholders. The minority shareholder coalition has proposed agenda items for the meeting to dismiss outside director Noh Dae-rae, a former chairman of the Fair Trade Commission, and Chaas Buntra, a professor at the University of Oxford and an outside director in the research and development (R&D) division. They have also proposed the appointment of one inside director and two outside directors as separate agenda items.

Among the eight members of Helixmith’s board of directors, including inside directors Kim Hoon-sik and Choi Dong-gyu appointed last year, five are intended to be from the minority shareholder side to secure management control. The minority shareholders claim this is "a fight to defend against reckless advances backed by a rubber-stamp board."

As the situation intensifies, Helixmith sent a letter to shareholders requesting opposition to the dismissal of the two current outside directors and support for the appointment of Park Young-joo, the head of the U.S. subsidiary, as a new inside director. The company also disclosed that Glass Lewis, one of the world’s two major proxy advisory firms, expressed support for the appointment of Park Young-joo, the inside director candidate recommended by Helixmith, and opposition to the dismissal of outside directors proposed by the minority shareholders. In the letter, Helixmith appealed, "Both outside director candidates proposed by the minority shareholder coalition are friends or juniors of the coalition’s lead lawyer from law school and have no experience in the bio and pharmaceutical fields. Due to relentless and persistent management attacks, all employees are deeply worried, and research cannot proceed properly."

Ultimately, the dispute between the two sides is likely to be decided by a vote at the shareholder meeting. Currently, CEO Kim Sun-young and related parties hold 7.35% of Helixmith’s shares, while minority shareholders hold up to 90%. Both Helixmith and the minority shareholders are reportedly preparing for the vote battle by collecting proxy votes.

◇Companies Struggle with Shareholder Return Demands= The changed status of minority shareholders is also evident in the case of LabGenomics. Earlier this month, the LabGenomics minority shareholder coalition criticized the company’s shareholder return policy as inadequate and demanded additional share buybacks, cancellation of existing treasury shares, and a bonus issue. The coalition stated, "Despite record-high sales and operating profits, the stock price is at its lowest point of the year. If there is no proper shareholder return plan, we will not hesitate to engage in a vote battle at the shareholder meeting." In response, LabGenomics decided to cancel about 119,000 treasury shares on the 10th and announced a bonus issue on the 16th to appease minority shareholders. Although the conflict appears to have been resolved for now, with minority shareholders holding nearly 80% of shares, there is a possibility that disputes could arise at any time.

In the case of Hanmi Pharmaceutical, minority shareholders lost a lawsuit for damages related to a ‘delayed disclosure’ controversy in January this year, resulting in a damage compensation burden of about 1 billion KRW. On the 7th of this month, other minority shareholders who had not participated in the previous lawsuit filed another lawsuit in court, suggesting that similar lawsuits may continue in the future.

Industry insiders emphasize the growing activism of minority shareholders and the need for ESG (Environmental, Social, and Governance) management. An industry official predicted, "To build trust with shareholders, companies will ultimately move toward a policy of expanding ESG activities, including transparent management information disclosure and social contributions."

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