Retail investors poised to gain more clout at 2024 shareholders' meetings

A composite image shows the headquarters of the country's largest financial groups — KB, Shinhan, Hana and Woori — that will hold the annual shareholders’ meetings in March. Korea Times file

Retail investors are widely expected to voice their demands for higher returns during this month's annual shareholders' meetings of major financial groups, emboldened by a government program that seeks to increase investment returns to address the chronic undervaluation of Korean shares compared to their global peers, according to securities industry officials, Sunday.

The government announced the Corporate Value-up Program in February to tackle the Korea discount phenomenon, and activist funds are exerting increased pressure on listed firms to enhance shareholders' voting rights.

Activist funds typically prioritize advocating for retail investors' rights as they seek to increase their ownership stakes in corresponding listed firms.

“The 2024 shareholders' meetings have the potential to finally allow retail investors to have their voices heard after years of being marginalized,” Meritz Securities analyst Cho Ah-hae said.

Three of the country’s four largest financial groups — KB, Hana and Woori — are scheduled to hold their shareholders’ meetings on March 22.

On the same day, Shinhan will convene its board of directors to determine the date for its shareholders’ meeting within this month.

Listed on the benchmark KOSPI, all four have been unattractive options for investors due to their price-to-book ratio (PBR) remaining below 1 for years. PBR measures whether a company’s share price is undervalued, with a number below 1 indicating that the stock may be trading below its fair value.

The four lenders have been increasing their dividend payout ratios to attract investors, and their combined ratio rose from 29.05 percent in 2022 to 35.05 percent in 2023.

“But the ratio fell short of retail investors’ expectations and they are likely to ask for bigger returns this year,” said Kim Kyu-shik, chairman of the Korean Corporate Governance Forum, which monitors transparent business management.

Kim added that the demand by retail investors will “gain further strength” as Align Partners, a Seoul-based activist fund, is calling on banking groups to return up to 50 percent of their net income to shareholders.

In a letter sent to the banking groups, Align Partners justified its demand by noting the overall rate of shareholder returns is 68 percent in advanced economies.

It has also been calling on financial groups to grant multiple voting rights for each shareholder in the selection of board directors.

Currently, a shareholder is only granted a single voting right. However, Align Partners is advocating for an increase in this number to match the total number of board directors, aiming to establish a more investor-friendly board.