COVER STORY Japan's shareholder activism boom: Benchmark for Korea, or cautionary tale?

Korea and Japan have long shared a corporate governance problem: companies in which insiders, such as founding families, wield outsized influence often at the expense of minority shareholders.

Both governments have sought to shift that balance by strengthening shareholder rights and pressing companies to improve governance and capital efficiency.

Japan moved first, introducing a stewardship code in 2014 and a corporate governance code the following year. The Tokyo Stock Exchange's 2023 directive urging management to be "conscious of cost of capital and stock price" gave activists a clearer framework for engagement.

That supportive policy environment has helped turn Japan into one of the biggest markets for shareholder activism. The accompanying focus on capital efficiency has also helped underpin the rise in Japanese equities.

Japan accounted for 56 percent of Asia's 205 activist campaigns in 2025 and 32 percent of the 100 campaigns recorded in the first quarter of 2026, according to Diligent Market Intelligence. Activists won 37 board seats at Japan-based companies in 2025, up from seven in 2024 and 23 in 2023.

"Having overtaken Europe as the second-most active hub for shareholder activism, Japan now sits at the center of investors' governance agenda," said Josh Black, editor-in-chief of Diligent Market Intelligence. "The result is a market where activism is embedded at historically high levels and boards are under real pressure to deliver long-term value."

Korea may now be entering a similar phase, as successive administrations seek to address the "Korea discount" — a persistent undervaluation of Korean companies — by tackling weak corporate governance. Multiple recent revisions to the Commercial Act and other reforms are giving minority shareholders a stronger footing and helping fuel a rise in activist engagement.

Sixty Korean companies faced activist demands in the first quarter of 2026, matching the total for all of 2025.

"Korea could follow a similar path to Japan over the longer term," said Yun Jung-in, CEO of Fibonacci Asset Management Global in Singapore.

But the rise of shareholder activism in Japan has also prompted growing concern over its potential downsides.

As demands for higher dividends and share buybacks have increased, some Japanese companies have pushed back, arguing that excessive shareholder payouts could constrain long-term investment and research and development.

Japan's ruling Liberal Democratic Party is now considering changes to the Companies Act that could make it harder for activist investors and other shareholders to intervene in corporate management.

"As activist funds become more influential, there is a need to strike a balance between the potential benefits — such as improved capital efficiency and better corporate governance — and the risks, including pressure for short-term gains and disputes over corporate control," said Hong Ji-yeun, a senior research associate at Korea Capital Market Institute.