What’s going on?

Global investors’ plans to demand higher shareholder returns from Samsung C&T (construction and engineering arm under Samsung Group) gradually ended. This suggests that South Korea’s boardroom etiquette hasn’t changed like the country aims to.

What does this mean?

• Activist investors buy enough shares in a company to earn them a voice in the boardroom. Specifically, a Norwegian oil fund and Canadian pension giant have been trying to push Samsung C&T to increase dividends by 75% and buy back around $375mn worth of shares. Both local and global experts have been advising shareholders to vote with the activists too.
• At the latest general meeting, however, the majority still backed BOD’s existing plan; this is actually of no surprise given that the Samsung Electronics chairman indirectly holds 50% of the votes.
• Samsung C&T’s stock fell by 10% right after the news.

Why should I care?

The bigger picture: The Reshaping has barely started

• Being home to world-famous conglomerates like Samsung and Hyundai, South Korea has still been held back by the so-called “Korea discount” – on paper, even the biggest South Korean companies are worth some 20% less than their international rivals
• Therefore, the government launched the “corporate value-up program“, but the Samsung vote hardly signals the start of a stock market makeover.

Zooming out: We all have a role model

• South Korea’s playbook is essentially Japan’s – from a lagging stock market to one of the world’s biggest. So theoretically, savvy investors could buy South Korean companies for cheap today and wait for the reforms to bring their returns.
• That said, it took Japan a decade to do so, and with South Korea’s plan already under scrutiny for its lack of detail, investors could be waiting a while.

Content source: 
1. Finimize (2024) Old Tricks
. Available at: https://finimize.com/content/old-tricks [Accessed on Mar 19, 2024]
2. Available at: https://koreajoongangdaily.joins.com/news/2024-03-15/business/finance/Samsung-CT-wins-majority-of-votes-against-activist-funds/2003430?utm_campaign=daily-global-19-03-2024&utm_source=email&utm_medium=Daily%20Global%20Edition%20Users&utm_content=Final&utm_term=Daily%20Global%20Edition%20Users [Accessed on Mar 19, 2024]