M&As to Get Boost From Asset Management Firms
By Park Hyong-ki
Staff Reporter
The Asset Management Association of Korea (AMAK) said it is working to finalize guidelines for fund management firms in executing their voting rights at shareholder meetings of companies in which they hold major stakes.
The draft guideline, disclosed at the end of November, comes as asset management companies are increasing their influences in the management of companies. The guideline basically directs the firms to vote against key management issues protecting unilateral control of the companies.
This, if finalized, will make it harder for companies to pass corporate articles aimed at reinforcing their control at shareholders' meetings.
Asset management firms have long demanded that further vitalization of M&As is essential for the development of the capital market.
The guidelines, which will be finalized by the end of December, also call for shareholder firms to vote for management transparency and expansion of shareholder rights.
This will allow asset managers to have a bigger say in the running of those companies. In the process, the companies will be required to make clearer public notices when making certain decisions or voting regarding company management.
``In most cases, these firms have been acting out for the interest of themselves or the relationship they have with companies, instead of for investors,'' said an official of asset management supervisory policy division for the Financial Supervisory Commission.
Asset management firms are also taking more active roles in boosting M&A deals, officials said.
``We could cumulate shareholding of companies more actively. We want to see more M&A deals take place on an easing of related rules,'' a CEO of a European asset management firm said. ``The rules on M&As should be relaxed further.''
Public Disclosure
Although many fund management firms follow their own in-house disclosure system rules and general rules set by the regulatory body, their public notices lack details about such decision-making procedures, that are hard for investors to understand. Usually, they disclose no more than a one-line statement, which lags far behind the standards of foreign countries such as the United States and England, the official said.
``When asset management or investment firms overseas disclose their decisions regarding management, they actively disclose in detail as to why they made such a decision and how it could benefit investors _ the whys and hows,'' said the official.
However, Korean asset management firms tend to reveal a minimum amount of information about their management decisions in which they have voting rights.
Recently, Mirae Asset Investments, the country's largest fund management company, sided with Dong-A Pharmaceutical management headed by the incumbent Chairman Kang Shin-ho, instead of having it run by his second son, Moon-seok.
Details of its public disclosure were nothing more than just having ``confidence in the current management's performance and its vision in terms of raising corporate value.'' Mirae Asset is the largest institutional shareholder with a 7.73 percent stake in the nation's largest drug maker.
Asset managers' voices on this issue are getting bigger amid the expansion of the so-called fund capitalism. The accumulated value of the country's fund management firms with more than a 5 percent stake in corporations has risen to 12.1 trillion won this year, up 100 percent from the end of last year, according to the Korea Exchange.
For instance, Mirae Asset holds more than a 5 percent stake in each of about 30 companies. Its shareholdings of more than 5 percent of Korean companies are totaled at over 5 trillion won, followed by Samsung Investment Trust Management at 127 billion won and Shinyoung Investment Trust Management at 75 billion won.
The guideline to be fixed by AMAK will have no binding force.
``On our part, what we have to do is monitor whether they are filing public notices fairly and transparently, and abiding by general requirements, while the association leads the campaign,'' said the FSC official. ``We are not looking to regulate their managerial decision-making.''
He said the asset management association is heading the campaign to draw standards for the public disclosure system.
``We are currently putting final touches on the guideline with related organizations with the aim of completing it this month,'' said a spokeswoman of the association.