SOUTH KOREA Law and Practice Contributed by: Hyeon-Deog Cho, Yeong-Ik Jeon, Ji-won Lim and Hakbum Ahn, Kim & Chang
• recommending director and officer candidates and campaigning for the appointment of directors (especially an outside director who will serve as an audit committee member and thus elected sepa- rately from other directors) who would represent the interests of minority shareholders; • challenging excessive compensation for directors or their management misconduct and requesting improvement thereof; • matters relating to shareholder return policies, including reasonable determination of the size of dividends, the acquisition of treasury shares, and the optimisation of capital structure; and/or • disposal of idle assets serving non-core/non-busi- ness purposes, or corporate restructuring through mergers and acquisitions. 11.3 Shareholder Activist Strategies Strategies used by activist shareholders in Korea are similar to those used in other countries and depend on their objectives or the circumstances of the relevant companies. Activist shareholders may communicate their request informally in a letter to the board of direc- tors or ask for a conversation with the management; on the other hand, official or legal procedures include exercising shareholder rights to propose a sharehold- er meeting agenda and/or to call for a shareholder meeting, and soliciting the votes of other shareholders by proxies. The right to propose a shareholder meeting agenda is the most frequently employed strategy among the above options. If the company rejects the inclusion of the agenda proposed by the activist shareholder, the shareholder often files a preliminary injunction in court for the inclusion of such proposed agenda. 11.4 Recent Trends Shareholder activism in Korea mostly appeared in major conglomerates until the mid-2010s but has been expanding in recent years, with a number of shareholder activism cases targeting mid-cap com- panies as well as small and medium enterprises. In particular, Korea’s state-run National Pension Ser- vice (NPS) announced the introduction of the Korean Stewardship Code in July 2018, signalling the poten- tial shift to more active assertion of their shareholder rights. In addition, the amendment to the KCC in
2020 expressly stipulates that shareholders of listed companies may selectively exercise minority share- holders’ rights under the special provisions for listed companies as well as under general provisions, and strengthens minority shareholder rights through pro- viding for a separate election system for audit com- mittee members as well as multi-tier derivative action. Furthermore, in 2025, the new administration and the ruling party are pursuing a range of policy initiatives – including amendments to the KCC and the FSCMA – to address the so-called “Korea discount” on shares of Korean companies and to revitalise Korea’s stock market. Consequently, it is expected that shareholder activism, demanding enhancement of corporate value through increased dividends, cancellation of treasury shares, and corporate governance reforms, will gain momentum. Key examples of shareholder activism in Korea in recent years include the following: • Some activist shareholders actively request that the management acquire or cancel treasury shares. For example, activist funds, both domestic and foreign, including City of London Investment Management and Anda Asset Management, united to propose an agenda for dividend increases and an additional share buyback programme through shareholder proposals at Samsung C&T’s regular shareholders’ meeting in 2024, which was rejected at the general meeting of shareholders. • Another notable objective relating to companies with a related parties transaction issue – which may damage corporate value – is to oppose such affiliate transactions. In 2022, Align Partners argued in an open shareholders’ letter that SM Entertain- ment entered into an unfair agreement with another company controlled by SM Entertainment’s largest shareholder (an individual), causing a “tunnelling” effect transferring SM Entertainment’s profits to the largest shareholder, and that such agreement should be terminated. SM Entertainment accepted the request and terminated the agreement at issue. • Activist shareholders also seek to appoint their pre- ferred candidates to serve on the board of direc- tors. For instance: (i) KCGI proposed an agenda to place its preferred outside director on Hanjin KAL’s board of directors in 2019 and also proposed an
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