Investors Criticize Korean Firms for Undermining Shareholder Rights Reforms

A recent forum co-hosted by the International Corporate Governance Network (ICGN) and the Democratic Party's K-Capital Market Special Committee has brought to light serious concerns among domestic and international institutional investors and experts regarding corporate governance practices in South Korea. The core issue revolves around listed companies' attempts to circumvent the spirit of the revised Commercial Act, which aims to enhance shareholder rights and improve corporate governance.

Specifically, the forum highlighted instances where companies have sought to extend director terms from two to three years or reduce the number of directors. These maneuvers are seen as direct challenges to the mandatory cumulative voting system, designed to ensure fairer representation on boards. Despite opposition from domestic institutions like the National Pension Service, foreign advisory firms like ISS have often recommended approval, leading to high pass rates for these contentious agenda items. This disconnect between domestic intent and foreign advisory influence is a significant point of contention.

From a South Korean perspective, as reported by the Hankyoreh, this situation is deeply troubling. The revised Commercial Act was a hard-won step towards greater transparency and accountability. The fact that companies are actively seeking loopholes undermines investor confidence and signals a resistance to genuine corporate governance reform. The call for urgent GMS system improvements, such as mandating at least four weeks' notice for agenda items, is crucial. This would allow shareholders, especially individual investors who often face difficulties in accessing and analyzing information promptly, sufficient time to make informed decisions. The current practice of concentrating GMS and disclosure of critical reports creates an uneven playing field, and addressing this is vital for fostering a healthier capital market in Korea.