"Small Shareholders with Increased Unity... Must Prepare to Defend Management Rights"

원본보기 아이콘

The most notable trend in this year's general shareholders' meeting season is the small shareholder movement centered around online platforms. Cases of company management being threatened by the growing solidarity among small shareholders each year are increasing.

There is a growing call for the introduction of appropriate management defense systems to dispel corporate management uncertainties and focus on investment and growth.

According to a recent study titled "Changes in Shareholder Activism and Implications" published by the Korea Chamber of Commerce and Industry, an analysis of 412 companies that had shareholder proposals over the past decade showed that the number of shareholder proposals by small shareholders and small shareholder coalitions increased 2.2 times from 33 cases in 2015 to 73 cases last year.

While past small shareholder movements were characterized by one-time actions by a few individual investors, recent small shareholder movements have gained strength in collective action through high cohesion using platforms.

This is due to the activation of online platforms advocating shareholder activism, where actual shareholder verification has become possible through MyData (the right to request personal information transfer), making communication and voting power consolidation among small shareholders easier.

The number of subscribers to related small shareholder platforms, HeyHolder and ACT, also more than doubled from about 46,000 at the end of 2023 to about 97,000 at the end of last year, and the number of app subscribers exceeded 120,000 this year.

This is why there is an analysis that the proportion of small shareholders will have a considerable impact on corporate management in the future.

In particular, small and medium-sized enterprises and mid-sized companies where the difference in shareholding ratios between the largest shareholders and small shareholders is not large have been found to be easily exposed to management interference by small shareholder coalitions.

In fact, as the regular shareholders' meeting season ended in March this year, there has been a noticeable increase in cases where shareholder proposals were passed at some listed companies, and individuals recommended by small shareholder coalitions entered the board of directors.

At T-PLEX, a KOSDAQ-listed company, a full-time auditor recommended by the small shareholder coalition, which raised issues such as family management, was appointed, defeating the reappointment of the existing auditor.

At Oscotec, small shareholders upset about the subsidiary's listing push blocked the reappointment of founder and CEO Kim Jeong-geun, while the appointment of a non-standing auditor proposed by shareholders was approved.

Additionally, at DI Dongil, an auditor recommended by small shareholders was replaced for the first time in six years, and at H.PIO and Amicogen, auditors recommended by shareholders were also elected.

While such shareholder activism has positive aspects in strengthening shareholder rights, it can also cause corporate management instability due to shareholding reversals or excessive shareholder return demands. Experts agree that companies can no longer delay protecting their management rights.

This is because major domestic companies lack appropriate management defense measures. They are also helpless against hostile mergers and acquisitions (M&A) attempts.

The Korea Economic Association has also taken steps to prepare countermeasures for corporate management defense. The International Management Institute, an affiliate of the Korea Economic Association, is partnering with the Korea Economic Daily and proxy advisory firm Locomotive to conduct a "Management Defense Academy."

This year marks the second session, aiming to analyze various management threats faced by companies and seek practical response measures.

The main educational content includes key points of the amended Commercial Act related to management defense, management defense methods and legal processes, proxy voting status, and domestic and international activism cases. Experts such as lawyer Kim Ji-pyeong from Kim & Chang, Moon Seong, a Yulchon lawyer and former head of the National Pension Service shareholder rights exercise team, and Oh Seung-jae, CEO of Sustainvest, a domestic proxy advisory firm, will participate in the sessions.

© The Asia Business Daily(www.asiae.co.kr). All rights reserved.