FSS warns activist funds against 'excessive demand,' urges long-term focus

Korea's financial regulator warned against 'excessive demand' from activist funds and urged long-term strategies.

Financial Supervisory Service Gov. Lee Bok-hyun, second from right, speaks during a conference on shareholder activism held on Thursday in western Seoul. [YONHAP]

The chief of Korea’s financial regulator warned against “excessive demand” from activist funds, calling for a long-term approach to ensure lasting growth in the Korean market.

“I’d like to encourage shareholder activist investors to proactively present long-term growth strategies for companies and shareholders,” said Financial Supervisory Service (FSS) Gov. Lee Bok-hyun on Thursday, stressing that “excessive demand seeking only short-term profits will not only hamper the long-term growth drive for companies but also pose a challenge to capital market enhancement.”

The comment came as part of Lee’s opening remarks during a conference on shareholder activism held in western Seoul that day.

Shareholder activism — wherein equity owners exercise their voting rights to pass board resolutions — has been on the rise in Korea over the past several years. The number of agenda items put forward by shareholders during annual general meetings climbed from 59, with 26 companies involved, in 2020 to 48 from 22 companies in 2021, 61 from 27 companies in 2022 and 108 with 46 companies in 2023.

The figure reached 93, involving 40 companies in 2024. However, only 30 percent of the proposals earned votes from a majority of shareholders during annual meeting season — which spans from March to April — this year.

“As shown in the results of this year’s shareholder meetings, [shareholder activism] may end up as a hollow campaign without any support if it is not based on solid strategy,” said Lee.

At the same time, the governor called for companies to “listen to shareholders’ voices and actively engage with fair demands.”

Lee urged public companies to “continue to work on enhancing shareholder value and establishing sound governance structures,” saying that today's shareholder activism is likely to expand into calls for expanded corporate social responsibility.

Representatives from activist funds such as Truston Asset Management, Anda Asset Management, Korea Climate & Governance Improvement Fund and Align Partners Capital Management attended the conference, as did officials from the National Pension Service and Shinhan Financial Group. KT&G and DB HiTek, both recently targeted by shareholder activists, were also present.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]