[Column] "Interpreters Are Not Shareholders": Korea's Shareholders' Meeting

"They say interpreters can't enter unless they are shareholders. Then how are foreigners supposed to attend the shareholders' meeting?"

Foreign asset management firms that attended LG Chem's regular shareholders' meeting on the 25th of last month expressed their dissatisfaction. As global investors attending shareholders' meetings across Asia, they were taken aback by the company's response to prohibit personal interpreters from accompanying them on the day of the meeting. LG Chem is not a small or medium-sized enterprise but the 12th largest company in Korea by market capitalization, valued at 28 trillion KRW. Although the foreign ownership ratio recently dropped to 39%, as of the end of December last year, it was close to 43%. This is still high compared to the approximately 34% foreign ownership ratio in the KOSPI market.

In fact, during the reporting process, it became clear that foreign institutional investors face unexpectedly difficult challenges when attending Korean shareholders' meetings. Many listed companies believe that meeting only the minimum legal requirements is sufficient. According to Korean Commercial Law, listed companies only need to notify shareholders 14 days before the meeting. In advanced countries like Australia and the UK, announcements must be made at least 21 days in advance. It is not easy for global institutional investors who invest worldwide to review documents, receive proxy advisory opinions, and participate in Korean shareholders' meetings within such a short period.

The formal procedures for completing proxy documents and proving shareholder status before attending the meeting are also hurdles. For proxies, a power of attorney, the principal's seal certificate, and the proxy's ID are required. Foreign companies require even more complex authentication processes than domestic companies.

There are criticisms that this falls short of achieving the essential purpose of shareholders' meetings, which is 'free communication.' In LG Chem's case, it also faced public criticism from foreign institutional investors at the 2023 shareholders' meeting. At that time, Yoo-Kyung Park, General Director of the Netherlands' public pension fund APG (All Pension Group), attended the meeting and pointed out the issue of 'rubber-stamp meetings,' saying, "It is surprising that the meeting follows a prearranged script." She also highlighted the lack of shareholder rights protection regarding LG Energy Solution's spin-off.

President Yoon Suk-yeol raised the 'stock market' as a key topic during the 2024 Financial Services Commission's New Year work report and public livelihood meeting. Responding to the policy, foreign net purchases of KOSPI-listed companies in the first quarter exceeded 15 trillion KRW for the first time in a quarter. As of the 21st of last month, the foreign market capitalization ratio in the KOSPI market reached 34.07%. The ultimate success of value-up programs depends on the long-term cooperation of foreign investors and institutional investors. Even if government and financial authorities conduct IR activities in New York and Hong Kong, no investor would want to invest in companies abroad that maintain a closed mindset.

"Although the Korean capital market has undergone many changes, the corporate shareholders' meeting culture has not changed significantly." It is worth reflecting on this poignant observation by Jamie Allen, former Secretary-General of the Asian Corporate Governance Association (ACGA), who has observed the Korean capital market for 25 years since the early 2000s during the Kim Dae-jung administration.

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