[Inside Chodong] The Era of Shareholder Silence Is Ending

As the March shareholder meeting season gets into full swing, the business community is abuzz with talk of “threats to management rights.” This is largely due to the distinctly intensified nature of “shareholder proposals” in recent years. Whereas demands were limited to “increasing dividends” just a few years ago, they now target board composition, capital allocation, and overall corporate governance. Furthermore, this year’s implementation of the revised Commercial Act, which places greater emphasis on shareholder protection, has only heightened corporate anxiety.

However, it is worth taking a step back to reconsider the situation. Isn’t it a fundamental right for investors to raise questions and make their voices heard?

It is clear that the era of shareholder silence in the Korean market is coming to an end. Investors are now actively scrutinizing not only companies’ dividend policies and corporate governance, but also capital allocation. The minority shareholder platform ACT has sent shareholder proposals to 17 companies this year, demanding the appointment of independent directors, normalization of director compensation, and the clarification of shareholder rights. For DB HiTek, they called for the appointment of a special auditor to investigate alleged insider transactions, while for Shinpoong Pharm, they urged the distribution of recovered embezzled funds as dividends.

The actions of activist funds are also growing more vigorous. Firms such as Pallas Capital, Align Partners, Truston Asset Management, and VIP Asset Management have issued public shareholder letters raising issues about management strategies, capital policies, and insider transaction structures. They are also seeking to participate directly in decision-making by seeking board seats. In addition, the National Pension Service, long criticized as a mere “rubber stamp,” has announced that it will exercise its voting rights more actively starting with this year’s shareholder meetings.

As a result, a structure is emerging in the Korean capital market where minority shareholders, activist funds, and institutional investors are acting in concert. This trend is likely to lead to changes in corporate governance and to establish new standards and norms in the Korean capital market.

Of course, the concerns of the business community are not entirely unfounded. The spread of activism could drive corporate management to focus excessively on short-term results. There are also worries about “hit-and-run” tactics, with investors prioritizing quick profits. From the perspective of management, shareholder proposals undoubtedly introduce additional uncertainty.

However, now that new standards are taking shape in the Korean capital market, viewing the active engagement of shareholders as merely an infringement on management rights may mean ignoring the tide of change. Korean corporate governance has long been criticized for limited shareholder communication and closed board structures. The current expansion of shareholder actions may simply be the belated activation of much-needed checks and balances that have not functioned effectively until now.

In global capital markets, this kind of tension based on checks and balances actually serves to enhance corporate competitiveness. As investors ask questions and executives offer explanations, the board can function more independently, and standards for capital allocation become more transparent. With repeated engagement, market norms and corporate governance can advance to a higher level.

It is clear that the Korean capital market stands at an important turning point. Whether the expansion of shareholder action is seen as a mere threat or as a sign of a maturing market is up to companies themselves. Now is the time to work with these newly vocal shareholders to help establish new norms for the market.

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