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Stockholders’ Meetings Focus on Value

Posted February. 14, 2006 03:01,   


The 2006 stockholders’ meetings season started yesterday with Nexen Tire and Inzi Controls.

Unlike last year, this season will not feature scuffles and people thrusting their fingers into the faces of people demanding corporate governance improvements. The People’s Solidarity for Participatory Democracy, a civic group, has declared they will not attend general stockholders’ meetings this year.

Instead, the focus of this year’s meetings will be on institutional investors and their demands for more stockholder value.

The number of companies with more than five percent of their stake in the hands of institutional investors has gone up substantially due to the rising popularity of funds. Accordingly, institutions which used to ask for higher dividend through informal channels are now voicing their corporate long-term value concerns directly.

What foreign investors, who declared their intentions to participate in management last year, will say at the stockholders’ meetings is being anticipated with interest as well.

Institutional Investors Now Have More Say-

Korea Investment Trust Management recently sent inquiries to 120 investment companies asking them whether they will implement policies to strengthen stockholder value, and about the current state of their businesses, this year’s business plan, dividend policies, and buy-backs.

Kim Sang-baek, the head of the stock management department at Korea Investment Trust Management, said, “We have sent inquiries to companies before, but this year, we sent them to every companies that has more than one percent of its stake in the hands of investors. We will take specific action on their answers at a general meeting.”

Mirae Asset, which accounted for 30 percent of the total fund money in the market last year, decided through internal discussions to actively participate in the general meetings of companies that will try to re-elect directors whose dividends are absurdly low, or whose participation rate is low.

Sohn Dong-sik, the head of the stock management department at Mirae Asset said, “The improvement in corporate governance that People’s Solidarity requested last year has been accomplished to some degree. From now on, the biggest meeting issue will be how much profit investor can secure.”

This attitude to be prevailing among other institutional investors as well

According to research by The Korea Exchange, the number of listed companies with more than five percent of their stakes in the hands of institutional investors increased 61.1 percent compared to last year. In particular, the number of asset management companies that own more than five percent of the stake in a company is up by 172.1 percent in the stock market overall, and by 132.1 percent on the KOSDAQ.

Lee Jong-wu, the head of the marketing department at Landmark, an asset management company, said, “Because the indirect investment craze has settled down, stock-related industries are being upgraded now.”

Companies Also Pay a Visit to Hold an Explanation Meeting-

As institutional investor influence becomes stronger, corporations have begun to manage institutional investors.

It has been a regular practice until now for companies to hold large investor relations (IR) meetings with analysts from securities companies, or for analysts to visit companies directly.

But more and more IR personnel are visiting investment trust companies or asset management companies without special issues these days.

SK Telecom, Korea Development Corporation, Hanaro Telecom and others have held “call IR” meetings. Call IR meetings are common in the U.S. and Europe.

Park Tae-kwon, the head of an IR team for SK Telecom, said, “We visit institutional investors to provide information and report their reactions to management swiftly. This has been useful in our company’s decision-making process.”

Samsung Electronics Seems to Be Remaining Calm As Well-

Samsung Electronics, which has clashed with People’s Solidarity in past stockholders’ meetings, is free of that burden this year.

Samsung Electronics plans to re-elect Chairman Lee Kun-hee, Vice-Chairman Yun Jong-yong, Vice-Chairman Lee Yun-wu and President Choi Do-seok, officers whose terms of office are expiring, and co-opt outside directors.

Kia Motors will re-elect Hyundai Motor and Kia Motors Chairman Chung Mong-koo, and Kia Motors President Chung Eui-sun as directors, who will take legal responsibility for management activities.

Im-Sook Ha Sang-Soo Kim artemes@donga.com ssoo@donga.com