Annual Voluntary Disclosure of Corporate Value-Up

The financial authorities have unveiled a draft of the 'Corporate Value-Up Program,' which requires all listed companies on the KOSPI and KOSDAQ?approximately 2,400 firms?to voluntarily disclose their corporate value enhancement plans annually. This is a voluntary disclosure format without mandatory enforcement. To encourage companies' voluntary participation, a 'Korea Value-Up Index' composed of companies with excellent corporate value will be developed, along with a related exchange-traded fund (ETF). However, more direct tax benefits such as corporate tax reductions, which companies had hoped for, were not included.

On the morning of the 26th, the Financial Services Commission and the Korea Exchange, among other related agencies, held the '1st Seminar on Corporate Value-Up Support Measures for the Leap of the Korean Stock Market' at the Korea Exchange in Yeouido, Seoul, announcing policies to resolve the Korea Discount (undervaluation of the Korean stock market). Kim Ju-hyun, chairman of the Financial Services Commission, had stated on April 17 during a financial commission work report presided over by President Yoon Seok-yeol, "We will create an investor-friendly stock market environment through programs such as the Corporate Value-Up Program."

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The main actors in the Corporate Value-Up Program are the companies themselves. The target includes all companies listed on the domestic stock market; as of the end of 2023, there are 809 companies on the KOSPI and 1,584 on the KOSDAQ. Companies will conduct self-assessments using the most appropriate indicators among capital cost, capital profitability, and market evaluation, then establish medium- to long-term goals and plans spanning three years or more. The prepared plans will be disclosed once a year on their own websites and voluntarily reported to the exchange. The results of the implementation evaluations will be shared with both institutional and general investors. The authorities will provide comprehensive guidelines on disclosure principles, content, and methods. To encourage voluntary participation, five types of tax support will be offered: preferential treatment for selection as exemplary taxpayers, preferential pre-review for research and development (R&D) tax credits, preferential consulting for corporate tax credits and reductions, preferential claims for value-added and corporate tax adjustments, and consulting for business succession. However, tax benefits such as corporate tax reductions, dividend income tax rate cuts, or separate taxation, which companies had anticipated, were excluded.

The authorities will support investors in actively evaluating companies' efforts to improve corporate value. By September, the exchange will develop the 'Korea Value-Up Index,' focusing on 'corporate value excellence companies,' enabling institutional investors such as pension funds to use it as a benchmark (BM) index. An ETF based on this index will also be launched by the end of the year. The guidelines will be revised in the first half of this year to reflect related efforts in the 'Stewardship Code' (active voting rights exercise by institutional investors), which is the behavioral guideline for institutional investors. Key investment indicators such as price-to-book ratio (PBR), price-to-earnings ratio (PER), and return on equity (ROE) will be compared and provided by gathering information scattered across existing exchange information data systems by market and industry.

The Financial Services Commission will collect corporate opinions on the first draft of the guidelines in May and finalize the plan by June. From the second half of this year, a support system will be established to enable companies that are prepared to implement the system, and incentives will be provided. To continuously promote the Corporate Value-Up support measures as a mid- to long-term task, the establishment of a dedicated department and the construction of a website will also be carried out concurrently.

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