[Inside Chodong] Shareholder Meeting Season: Louder Voices from Minority Shareholders

The season of shareholder meetings has returned. Most shareholder meetings of listed companies are concentrated this month. This year, the voices of shareholders are expected to grow louder, raising the atmosphere even before the official start of the shareholder meeting season.

In the securities industry, the number of listed companies submitting shareholder proposals as agenda items for regular shareholder meetings is expected to nearly double from 27 last year to about 50 this year. This is because activist funds and minority shareholders have been actively exercising their shareholder rights recently.

Although there have been movements by minority shareholders to reclaim their rights in the past, meaningful achievements were rare. However, as individual investors investing in stocks rapidly increased after COVID-19, an environment empowering minority shareholders' voices was created. The stock investment boom in 2020-2021 opened the era of 10 million individual investors. The number of individuals owning shares of December fiscal year-end listed companies increased from 9.1 million in 2020 to 13.74 million in 2021.

Until now, the prevailing thought was that minority shareholders could do little, but as cases emerged where shareholders asserted their opinions, movements to reclaim rights became more active. A representative example is the physical division of major companies. In 2020-2021, major companies repeatedly engaged in physical division to transition to holding company systems by splitting off profitable businesses, raising concerns about the erosion of shareholder value among minority shareholders. This was because splitting off profitable businesses to establish subsidiaries and listing them diluted the equity value of existing shareholders. Subsequently, as minority shareholders took action, companies either withdrew physical division plans, shifted to relatively less harmful methods such as spin-offs, or chose not to list newly established subsidiaries.

As shareholders' voices grow louder, companies are strengthening shareholder returns. According to the Korea Exchange, the number of KOSPI-listed companies paying cash dividends increased from 537 in 2017 to 556 last year. The number of KOSDAQ-listed companies also rose from 544 to 589. Treasury stock cancellations are also on the rise. The number of treasury stock cancellation disclosures doubled from 32 in 2021 to 64 last year. The amount increased by 23% from 2.5407 trillion won to 3.135 trillion won during the same period. This year, companies continue to announce treasury stock cancellations. Samsung C&T announced it will cancel all treasury shares worth 3 trillion won within five years. Along with this, major companies such as Hyundai Motor (315.4 billion won), KB Financial Group (300 billion won), Meritz Fire & Marine Insurance (179.2 billion won), Shinhan Financial Group (150 billion won), Hana Financial Group (150 billion won), and KT (100 billion won) have announced treasury stock cancellation plans.

Low shareholder returns have long been cited as a factor in the Korea discount. According to the Korea Capital Market Institute, calculating the ratio of cash dividends and treasury stock repurchases to net income from 2005 to 2021 showed that Korea ranked between 27th and 45th out of 45 countries, indicating low shareholder return rates. Especially during 2010-2018, Korea ranked below 40th, among the lowest. This means there is still a long way to go for shareholder rights to be sufficiently enhanced.

Shareholder meetings are occasions where a company's shareholders gather to decide important company matters. Until now, they were places mainly for companies and some major shareholders. Now is the time for ordinary shareholders to become the protagonists of shareholder meetings and raise their voices.

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