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Samsung beware: Korea lays welcome mat for activist shareholders

[SEOUL] Attention activist investors: You may no longer be pariahs in South Korea.

President Moon Jae-in and his deputies have met with overseas money managers to change perceptions that Korean markets may be rigged to favor the nation's family-run conglomerates, Fair Trade Commission Chairman Kim Sang-jo said during an interview in Seoul. Some of those meetings were held by Moon during a recent trip to the US.

"It's a shame foreign investors have been so passive in Korea and haven't displayed levels of activism they would otherwise engage in developed markets," said Mr Kim, 54, a former shareholder activist who now supervises the conglomerates known as chaebol. "Bring money in, I promise to make it bigger." The meetings are part of a broader government effort to take on the dynasties that have fended off foreign activists and dominated Korea's economy for decades. Mr Moon's plan also includes giving the nation's US$530 billion pension fund a greater say at shareholder meetings of companies it invests in.

Heightened discontent over the government's cozy ties with big business swept Mr Moon into power this year after predecessor Park Geun-hye was impeached in an influence-peddling scandal that embroiled the biggest chaebol - Samsung Group.

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Since his inauguration, Mr Moon brought in Kim - who was once was dragged out of a Samsung general meeting after confronting executives - and hired another shareholder activist as his chief policy maker. Samsung heir Jay Y. Lee was sentenced to five years in prison for bribing his way to gain greater control as part of a broader scandal involving Park.

"I can promise to foreign investors that the Korean government will consistently enforce the law without distinguishing between local and foreign investors," Mr Kim said during a meeting before last week's holidays. "In turn, we're hoping foreign investors will be more aggressive and have a long-term view." Though Mr Kim isn't in charge of attracting investments, his office is taking steps to rein in potential chaebol misdeeds. The combined market capitalization of the five biggest chaebol's listed companies accounts for about half of the total Kospi, according to data compiled by Bloomberg.

His commission is creating a new bureau to investigate matters such as whether the chaebol are using charities to help retain control of their empires without having to pay inheritance taxes, he said. The FTC also is looking at getting more information on the chaebol's overseas units, he said.

Still, the commission's powers are typically limited to fining companies for violating existing laws, which is why Mr Kim said he's in talks with other officials - such as the justice minister, the financial regulator and the welfare minister - to coordinate efforts.

BLOOMBERG