[News Terms] Shareholder Value Expansion or Corporate Raiders?… 'Haengdongjuui Fund'

Ahead of the regular shareholders' meeting season for listed companies early next year, activist funds are making busy moves. Since this will be the first regular shareholders' meeting held after the dividend system reform, they are expected to actively push for corporate governance improvement and expansion of shareholder rights. According to the Commercial Act, shareholder proposal agendas must be submitted at least six weeks before the shareholders' meeting, and considering that most meetings take place in March, agendas should be received in January or February.

Activist hedge funds refer to hedge funds that secure a certain level of voting rights and demand asset sales, dividend increases, share buybacks, sales of stakes in subsidiaries and affiliates, restructuring, and governance improvements from companies, aiming to generate profits in the short term. They are characterized by actively demanding management improvements in the companies they invest in, rather than simply investing.

Regarding these activist hedge funds, there are proponents who argue that they contribute to corporate governance improvement and shareholder value enhancement, while there are also negative views that they may threaten corporate management by seeking only short-term gains. For this reason, activist funds are sometimes called "corporate raiders." Representative activist funds known in Korea include the US-based hedge fund Sovereign, which intervened in management by demanding the resignation of SK Group Chairman Chey Tae-won in 2003, and Elliott Management, which opposed the merger of Samsung C&T and Cheil Industries in 2004 and filed lawsuits.

According to the financial investment industry, Palisade Capital, a UK-based activist fund holding 0.62% of Samsung C&T shares, emphasized that Samsung C&T's stock price is undervalued and demanded governance improvements. These demands reportedly include ▲a 500 billion KRW share buyback ▲board diversification ▲leadership strengthening ▲sale of specific business units ▲conversion to a holding company.

Flashlight Capital Partners (FCP) sent an official letter earlier this month to KT&G requesting improvements in the appointment process for the president candidate. FCP pointed out that while KT&G's sales grew by 40%, operating profit decreased by 17%, significantly widening the operating margin gap with peers, and demanded that the next president candidate undergo a sufficient verification period and that candidate qualifications be disclosed externally.

KCGI Asset Management, which sent a shareholder letter demanding governance improvements to Hyundai Elevator last August, is actively conducting activist campaigns, including launching an ESG Co-Growth Fund in September. After KCGI acquired more than 2% of Hyundai Elevator shares and urged a re-examination of the director eligibility of Hyundai Elevator Chairwoman Hyun Jeong-eun, Chairwoman Hyun resigned from both the registered director position and the chairmanship of the board.

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