“Minor shareholders can be considered 'fan clubs of listed companies.' The reason they criticize and demand is that they care. The truly frightening thing is indifference.”
During the 2025 shareholder meeting (AGM) season, Lee Sang-mok, representative of the Conduit, which operates the act (ACT) platform that conducted shareholder action campaigns targeting 22 listed companies including DB HiTek, Lotte Shopping, and Emart, noted in an interview on March 18, “minor shareholders are friendly forces that can protect companies and can also become white knights.” He added, “Corporations should not fear the voices of minor shareholders but should seek ways to work together,” saying that “complaining about the increase in minor shareholder movements is nothing short of declaring war against fans.”
He stated, “As stock investing has established itself as a sound financial management tool, the number of investors entering the market has increased, and they are no longer tolerating companies' decisions that undermine shareholder value as they did in the past, leading to an increase in shareholder action campaigns. The act platform is currently providing strategies and consultations for consolidating shareholder movements based on a deep understanding of related regulations such as the Commercial Act and Capital Markets Act.”
In an interview, Lee remarked that “After the COVID-19 pandemic, the number of individual investors increased to 15 million, prompting both ruling and opposition parties to form task forces (TFs) for investor protection. It is unprecedented for the heads of financial authorities to support amendments to the Commercial Act for shareholder interests,” adding that “companies must find ways to adapt to the changing world.”
At the shareholder meeting of DB HiTek held on March 20, agenda items included quarterly dividends, share buybacks, and the formalization of minority shareholder protections. On March 25, at the Yulchon Chemical shareholder meeting, the company’s auditor committee proposal was voted down. Below is a Q&A.
Despite the government's push for a stock market value-up policy in 2024, the price-to-book ratio (PBR) of the Korean stock market has regressed. What do you think is the reason for this?
“There is still widespread distrust in the Korean stock market. Issues regarding the extraction of private benefits for minority shareholders due to controlling shareholders are severe. There seems to be no plan to reform corporate governance. A typical example is the reluctance to amend the Commercial Act to expand the duty of care of directors to include shareholders.”
The 2025 AGM season is characterized by very active shareholder actions from minority shareholders. What historical context do you think underlies this?
“After the COVID-19 pandemic, stock investing has been highlighted as a sound financial management tool, resulting in a sudden increase in individual investors to about 15 million. Naturally, there has been increased interest in governance, and unlike in the past, there have been vigorous responses to actions such as asset partitioning and split listings that infringe on the interests of minority shareholders to maximize benefits for controlling shareholders. DB HiTek, Amicogen, Oscotec, and Emart are notable examples. With a heightened level of awareness, investors are increasingly taking action to correct unreasonable and unfair corporate decisions. Currently, shareholder actions have surged to the point where minority shareholders, using the act platform, have become active enough for act to report on shareholder activities.”
How many shareholder proposals has act made in the 2025 AGM?
“In total, approximately 20 shareholder proposals have been pushed forward. Among these, we focused on proposals for Young Poong, Lotte Shopping, and Emart, which have low PBRs. Considering that Lotte Shopping and Emart have excessively low PBRs, we made proposals for them. Young Poong instead expressed its support for both Young Poong Precision Corporation and Must as shareholder proposals. We felt the need to propose changes at DB HiTek due to its excess spending of corporate resources, such as investing over 100 billion won in DB World, a golf course and real estate management company that are non-core capabilities of the company. Although proposals for a concentrated voting system, share buybacks, and quarterly dividends were rejected at the shareholder meeting held on March 20, we will continue to work to enhance shareholder value through shareholder actions.”
Lotte Shopping, Emart, and Young Poong are struggling due to poor business conditions. Companies have reportedly claimed that they cannot afford to return shareholder value.
Lotte Shopping, Emart, and Young Poong have PBRs ranging from 0.1 to 0.2. This means that their stock prices are only 10 to 20% of their net worth. It is said that even a slight drop below a PBR of 1 is considered to have harmed shareholder value, but being around 0.1 is exceedingly unreasonable. Theoretically, it suggests that shareholders could acquire the company at its market capitalization and liquidate it for ten times the current stock price, which is nonsensical. Even considering the poor business conditions, allowing a PBR around 0.1 to go unaddressed is unacceptable to shareholders. Moreover, the new business investments pursued by these companies are seen as far from securing profitability. It is with this in mind that we decided to make shareholder proposals.”
During the shareholder action process at DB HiTek, conflicts arose with the activist fund KCGI.
“I believe that shareholder actions demanding the correction of policies that harm shareholder value cannot secure legitimacy if their justification collapses. The act of KCGI, which purchased a 7.05% equity stake and demanded improvements to governance and enhancement of shareholder value, selling off a large portion of its holdings at prices higher than the purchase price after achieving its goals due to the company's value-up plan, was an unjustifiable action. The parent company DB Inc, which acquired the KCGI's equity stake, has instead strengthened its control over DB HiTek. This led to controversy over 'greenmail' as shares were acquired by threatening the company, allowing management to buy them back at higher prices, capitalizing on the situation. This was behavior that lost sights of the original intent of the shareholder action.”
What was the reason for criticizing MBK Partners regarding the management rights dispute at Korea Zinc?
“Because it blocked the opportunity to introduce a concentrated voting system in Korea Zinc's articles of incorporation. Even if one opposes the arbitrary rule of Korea Zinc Chairman Choi Yoon-beom, opposing the introduction of a concentrated voting system, which is a protective measure for minority shareholders in corporations, was unjustifiable. While MBK raised the banner of improving corporate governance, it ironically took the opposite path from minority shareholders by opposing the concentrated voting system to win against the management of Korea Zinc, which is quite unfortunate. Since MBK succeeded in obtaining a temporary injunction to nominate directors based on the introduction of the concentrated voting system, this prevented the proposal for directors nominated based on the introduction of the concentrated voting system at this year's regular shareholder meeting.
Ultimately, the proposal for director nomination based on the concentrated voting system will now have to wait until next year, resulting in a situation where what could have been accomplished in one year has been divided into two years, making it difficult for minority shareholders to provide support. It is hoped that next time, MBK will engage in activist actions that minority shareholders can support as the leading fund in Northeast Asia.”
What reactions do institutional investors have to the shareholder proposals from the minority shareholders' alliance?
“Most have shown a positive response regarding the proposals. However, there is a strong atmosphere among financial firms, such as securities companies and asset management companies, to be cautious about publicly supporting shareholder proposals due to their relationships with companies. Nevertheless, due to the disputes between MBK and Korea Zinc, the atmosphere has slightly changed. Many financial firms have participated in the power struggle between the two sides, but in reality, the aftershocks haven’t been significant, which seems to alleviate institutional investors' vague fear. Additionally, it has been sensed that many financial institutions are positively shifting towards new attempts such as advisory shareholder proposals.”
Plus Point
How does the minority shareholder activism platform initiate shareholder proposals?
Recently, when issues arise that harm shareholder value, such as stock price crashes, capital increases, asset partitioning, and subsidiary listings, minority shareholders rarely remain indifferent. Minor shareholders, forming a consensus in forum discussions on portal sites like Naver, are actively mobilizing through platforms such as act to launch shareholder proposals.
Lee Sang-mok mentioned that “In the past, we had to promote act, but recently there has been an increase in cases where shareholders are demanding proposals from 'let's gather through act.'”
Shareholder proposals at act begin after verifying the actual stock ownership of shareholders through MyData certification. On this foundation of trust, shareholders prepare agenda items ahead of regular shareholder meetings.
According to Korean Commercial Law, regular shareholder meetings must be held annually, and proposals can be submitted at least six weeks in advance, as long as they do not violate company regulations. Among the 22 listed companies for which act has made proposals, in the case of DB HiTek, more than 5% of the equity has been accumulated, allowing shareholder opinions to be communicated to the company for three consecutive years.