Korean Corporate Governance Forum Opinion
Opposition party’s “Korea Booster Project” appears timely
“Five key initiatives to resolve Korea discount are all relevant”
On July 30, Jin Sung-joon, the party committee chairman of the Democratic Party of Korea enthusiastically endorsed the "Korea Booster Project" at the National Assembly. The title seems very fitting. Despite government’s ongoing Value-up policies, Korea discount has been deepening, in our view. As recent cases involving Doosan, Hanwha, and SK demonstrate, the problem of controlling shareholders' expropriation and infringement upon the rights of minority shareholders remains unaddressed. The gap between Korea and Japan's capital markets is widening. This is a grave situation that demands drastic measures to revitalize and ‘boost’ the market, rather than incremental improvements.
The recent enthusiasm for current administration’s Value-up initiatives has cooled, and it is increasingly being pointed out that there is no central leadership in place to drive these efforts forward. Our Forum will continue to encourage individual best practices through an inductive approach, as exemplified by Shinhan Financial (A+) and Woori Financial (A-), which last week unveiled top-tier Value-up plans. Unless the Korean stock market can achieve a total shareholder return (TSR) significantly higher than the current 5% per annum (including a 2% dividend yield), which ranks at the bottom of the OECD, our citizens will struggle to retire comfortably and our children will face a bleak economic future. The 14 million retail investors and 22.5 million National Pension Service (NPS) subscribers in Korea would probably resonate with Deng Xiaoping's famous saying, "It doesn't matter whether a cat is black or white, as long as it catches mice," when it comes to driving the value-up efforts.
The key initiatives announced, including:
1) expanding the scope of fiduciary duties of the board of directors to all shareholders;
2) mandating the appointment of independent directors;
3) gradually expanding the separate election of audit committee members;
4) expanding cumulative voting for large corporations; and
5) expanding voting rights for minority shareholders
are all crucial to addressing the Korea discount. The aforementioned content aligns with the "10 Value-Up missions proposed to the 22nd National Assembly" proposed by our Forum on April 5th. It seems that the key issues for the Korea Boost Project have been well-selected by the opposition party.
Value-up, once a core economic policy of the Yoon administration, has nearly vanished, in our opinion. It is crucial that the Democratic Party of Korea build upon today's announcement of the Korea Booster Project and pursue it steadfastly. Lawmaker Nam- gun Kim, a participant in today's press conference, demonstrated a profound knowledge of corporate governance. The corporate governance conference held at the National Assembly (and sponsored by our Forum), organized by eight opposition party lawmakers, Park Sang-hyeok, Yoo Dong-soo, Kim Nam-gun, Kang Hoon-sik, Oh Gi-hyung, Kang Jun-hyun, Lee Jung-mun, and Min Byung-deok on July 23, was very insightful. These lawmakers, predominantly from the Assembly’s critical National Policy Committee, exhibited a sincere and profound understanding of corporate governance, backed by substantial experience. At the conference, a pragmatic alternative was proposed: to prioritize corporate governance reforms for listed companies by amending the Capital Markets Act instead of the Commercial Code.
The challenges facing our capital markets today extend far beyond stock investments and directly impact the future of all Koreans. We urge the government, the ruling party, and the Democratic Party of Korea to rise above partisan politics and work together to foster sustainable growth and prosperity through initiatives such as Value-up or Booster projects.
August 1st, 2024
Korean Corporate Governance Forum
Chairman, Namuh Rhee
Korean Corporate Governance Forum Opinion
Opposition party’s “Korea Booster Project” appears timely
“Five key initiatives to resolve Korea discount are all relevant”
On July 30, Jin Sung-joon, the party committee chairman of the Democratic Party of Korea enthusiastically endorsed the "Korea Booster Project" at the National Assembly. The title seems very fitting. Despite government’s ongoing Value-up policies, Korea discount has been deepening, in our view. As recent cases involving Doosan, Hanwha, and SK demonstrate, the problem of controlling shareholders' expropriation and infringement upon the rights of minority shareholders remains unaddressed. The gap between Korea and Japan's capital markets is widening. This is a grave situation that demands drastic measures to revitalize and ‘boost’ the market, rather than incremental improvements.
The recent enthusiasm for current administration’s Value-up initiatives has cooled, and it is increasingly being pointed out that there is no central leadership in place to drive these efforts forward. Our Forum will continue to encourage individual best practices through an inductive approach, as exemplified by Shinhan Financial (A+) and Woori Financial (A-), which last week unveiled top-tier Value-up plans. Unless the Korean stock market can achieve a total shareholder return (TSR) significantly higher than the current 5% per annum (including a 2% dividend yield), which ranks at the bottom of the OECD, our citizens will struggle to retire comfortably and our children will face a bleak economic future. The 14 million retail investors and 22.5 million National Pension Service (NPS) subscribers in Korea would probably resonate with Deng Xiaoping's famous saying, "It doesn't matter whether a cat is black or white, as long as it catches mice," when it comes to driving the value-up efforts.
The key initiatives announced, including:
1) expanding the scope of fiduciary duties of the board of directors to all shareholders;
2) mandating the appointment of independent directors;
3) gradually expanding the separate election of audit committee members;
4) expanding cumulative voting for large corporations; and
5) expanding voting rights for minority shareholders
are all crucial to addressing the Korea discount. The aforementioned content aligns with the "10 Value-Up missions proposed to the 22nd National Assembly" proposed by our Forum on April 5th. It seems that the key issues for the Korea Boost Project have been well-selected by the opposition party.
Value-up, once a core economic policy of the Yoon administration, has nearly vanished, in our opinion. It is crucial that the Democratic Party of Korea build upon today's announcement of the Korea Booster Project and pursue it steadfastly. Lawmaker Nam- gun Kim, a participant in today's press conference, demonstrated a profound knowledge of corporate governance. The corporate governance conference held at the National Assembly (and sponsored by our Forum), organized by eight opposition party lawmakers, Park Sang-hyeok, Yoo Dong-soo, Kim Nam-gun, Kang Hoon-sik, Oh Gi-hyung, Kang Jun-hyun, Lee Jung-mun, and Min Byung-deok on July 23, was very insightful. These lawmakers, predominantly from the Assembly’s critical National Policy Committee, exhibited a sincere and profound understanding of corporate governance, backed by substantial experience. At the conference, a pragmatic alternative was proposed: to prioritize corporate governance reforms for listed companies by amending the Capital Markets Act instead of the Commercial Code.
The challenges facing our capital markets today extend far beyond stock investments and directly impact the future of all Koreans. We urge the government, the ruling party, and the Democratic Party of Korea to rise above partisan politics and work together to foster sustainable growth and prosperity through initiatives such as Value-up or Booster projects.
August 1st, 2024
Korean Corporate Governance Forum
Chairman, Namuh Rhee