Hosting an annual shareholders' meeting? 'Prepare earlier,' says ESG veteran

Korea's 2024 shareholders' meeting season has seen an increased need for stakeholder engagement, says Alliance Advisors Managing Director Julie Rhee.

Alliance Advisors Managing Director Julie Rhee speaks during an interview with the Korea JoongAng Daily in central Seoul on May 10. [SHIN HA-NEE]

[Interview]

Korea's 2024 shareholders' meeting season was marked by several high-profile activist movements — from minor shareholders’ thwarted campaign against Samsung C&T to the partial victory of local investor Align Partners over JB Financial Group.

Such a trend, according to Julie Rhee, managing director of New Jersey-based Alliance Advisors, highlights the growing need for market players to ramp up their stakeholder engagement efforts around the yearly clock.

Companies, as well as activist funds, “need to be putting their rationale forward early on and making their viewpoints understood,” the corporate governance veteran said.

“It’s becoming more and more critical that companies start dialogue and prepare earlier,” stressed Rhee, adding that “the common factor in every single project is always that a lot of times, so many things can be avoided had there been dialogue before certain blackout periods.”

Rhee, based in Hong Kong, is a managing director handling Alliance Advisor's business expansion and client relationships in the Asia-Pacific region, with 16 years of capital market experience and expertise in environmental, social and governance (ESG). Before joining Alliance in 2022, Rhee led the Issuer Solutions business for S&P Global’s Korean operation.

Alliance Advisor is a U.S. corporate governance advisory firm with some 1,000 clients worldwide. In 2023, its first year in the Korean market, the firm provided services to firms including KT&G, Posco Holdings, KB Financial Group and Hana Financial Group during the annual shareholder meeting season. Clients also include shareholder activist funds, as the firm provided engagement support for Align Partners' campaign against JB Financial Group in 2023.

More recently, Alliance supported LG's annual meeting this year and provided proxy adviser support to OCI Holdings.

“We view Korea as a hot market, certainly, and that's not just because Korea is unique in that way, but [due to] an overall environmental situation,” noted Rhee.

“Proxy adviser policy is getting more and more stringent,” said the managing director, who also cited hiked ESG risks and a steady rise in shareholder activism in the Asia-Pacific region as some of the latest systemic shifts.

“Activism is increasingly becoming more prevalent in the overall Asian region, and we’ve seen a huge spike in Korea starting 2023 — and 2024 was even more active.”

Though cases where shareholder activist funds achieve the majority vote at an annual shareholders' meeting are rare, growing demand from the sector continues pressuring companies to better persuade investors and other stakeholders.

As a result, an increasing number of companies are opting to bolster their shareholder engagement efforts year-round rather concentrate them in peak periods, according to Rhee.

Coinciding with the growth in shareholder activism, Korean companies have been under growing pressure from both investors and the government to enhance shareholder returns. To resolve the chronic undervaluation of Korean stocks, or the “Korea discount,” the government recently introduced its corporate value-up program, designed to incentive public companies to bolster their stock prices.

Rhee was hesitant to assess the effectiveness of the program, which is still in an early stage, but commented that “what sort of structural or regulatory support will be put in place to actually support the program will be the key question.”

The director, in conclusion, touched on the future of her area of expertise. She acknowledged that ESG investing has declined in popularity from its peak two to three years ago but stressed that the practice is not likely to vanish from the governance space anytime soon.

Though its previous hype has certainly died down, ESG's “requirements and demands, along with regulations, have become more standardized” with more granular policy systems in place, potentially leading companies to abide by strengthened requirements in governance structure, Rhee said

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