"Even Karina Didn't Work" Aespa Seizes Victory at SM Shareholders' Meeting (Comprehensive)

SM Recommended Auditor Candidate Lim Ki-young Resigns for Personal Reasons
All Agenda Items for Appointment of Internal and External Candidates Opposed by Eollain Withdrawn

Minority Shareholders Say "SM Must Work for the Company, Not Individuals"

[Asia Economy Reporter Minji Lee] SM lost the vote for auditor appointment against activist private equity fund Align Partners Asset Management (hereafter Align) and minority shareholders at the regular general shareholders' meeting. Prior to the meeting, SM's recommended candidate Lim Ki-young announced his intention to withdraw, and Align's recommended candidate Kwak Jun-ho, former CFO of KCF Technologies (now SK Nexilis), was appointed as auditor.

At 9 a.m. on the 31st, the 27th SM general shareholders' meeting was held in the conference room on the 2nd floor of Acro Seoul Forest D Tower in Seongdong-gu, Seoul, with about 14 million shares (62.5%) out of approximately 23.16 million voting shares in attendance.

On that day, over 80 minority shareholders filled the meeting room. Align, the shareholder proposal side, submitted a large number of proxy voting forms, causing the meeting to be delayed for about an hour and a half to verify their authenticity. Before the meeting started, a minority shareholder who identified himself as a long-time SM shareholder spoke during the open remarks, saying, "I am here to support Align's shareholder proposal," and raised his voice, saying, "The largest shareholder, who holds less than 20% of shares, is shaking up management without paying dividends to shareholders and taking their money. They need to wake up."

The most anticipated agenda item, the auditor appointment, ended in Align's victory. Former Daewoo Securities President Lim Ki-young, recommended by SM, withdrew for personal reasons before the meeting, so only the vote on appointing auditor Kwak Jun-ho was held. Among the approximately 8.03 million shares represented by attending shareholders, about 6.53 million shares voted in favor of Kwak's appointment. Until the last moment, SM and Align fiercely competed to secure minority shareholders' voting rights. Under Korean commercial law, the appointment of auditors and audit committee members is subject to the '3% rule,' which limits major shareholders' voting rights to 3%, so even a large shareholder cannot guarantee victory in a vote. It is crucial which side other shareholders support. Looking at SM's shareholding structure, securing minority shareholders' shares (60.23%) is important. The largest shareholder Lee Soo-man (18.50%) and SM's registered executives hold 18.88%, and Align Partners (0.21%) holds more than 0.91% when combined with Samsung Securities (0.62%), the fund trustee, affiliates (CHL Investment 0.04%), and registered executives (0.70%). Additionally, the National Pension Service and KB Asset Management hold 6.16% and 5.13%, respectively. Previously, SM even offered autographed signatures of its artist Karina to shareholders who delegated their voting rights.

Lee Chang-hwan, CEO of Align Partners Asset Management, appealed, "SM should work for the company's development, not for individuals," and added, "It is unreasonable that SM's market capitalization lags behind the latecomer HYBE. I hope CEO Lee Soo-man will accept shareholders' opinions with an open mind through this general meeting."

With Align's shareholder proposal accepted, expectations for a stock price increase are expected to grow. Align argues that the governance issue, where Lee Soo-man, as an individual under the name Like Planning, has a producing contract with SM and receives a portion of sales as royalties, is significantly suppressing the stock price, and the board of directors bears great responsibility. According to Align, SM pays up to 6% of its sales to Like Planning. In fact, after listing, 142.7 billion KRW flowed to Like Planning until the third quarter of 2021, and 18.1 billion KRW flowed in the first three quarters of 2021.

Furthermore, the agenda items for appointing Lee Jang-woo, a professor at Kyungpook National University, as an outside director, and Choi Jung-min, SM True director, as an inside director, which Align opposed at the meeting, were all withdrawn as the candidates themselves expressed their intention to resign. Previously, Align urged shareholders to oppose Lee Jang-woo, citing his close ties to largest shareholder Lee Soo-man, and Choi Jung-min, who holds director positions in three SM affiliates, raising concerns about excessive concurrent positions.

Align's victory over SM in the vote is expected to increase institutional investors' interest in shareholder activism. On the 24th, at the Sajoo Oyang shareholders' meeting, the appointment of Lee Sang-hoon, a professor at Kyungpook National University Law School recommended by Cha Partners Asset Management, as an audit committee member was also approved. Hwang Se-woon, a researcher at the Korea Capital Market Institute, said, "As institutions actively engage in shareholder activism, individual investors' interest in enhancing shareholder value is expanding," adding, "Considering that individual shareholder value was not properly established, the voices of institutions need to become clearer."

Meanwhile, with rising expectations for enhancing shareholder value, SM's stock price recorded 81,000 KRW as of 9:50 a.m. that day. The recent two-month increase rate is close to 37%.

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