As in previous years, 2015 Korea Proxy Season is expected to run from February through March, with the vast majority of annual general meetings (AGMs) expected to be held during the last two Fridays in March. Korean proxy season is one of the most highly concentrated seasons globally. Historically, over 90 percent of all listed companies in Korea hold AGMs during the month of March. Due to a number of financial institutions changing their fiscal year-end from March to December in 2013, the AGM concentration in 2014 increased to a record level, with 97 percent of all listed companies holding AGMs in March. The meeting concentration for the 2015 season is expected to be similar with that of 2014.

During the 2014 Korea Proxy Season, the peak meeting days were March 21, 28, and 27–in the order of concentration–during which approximately 80 percent of all AGMs under ISS coverage were held. In the 2015 season, the peak dates are expected to be March 13, 20, and 27, with the highest concentration expected on March 20.

In addition to the high concentration of meetings, the Korean proxy season is known for a short time frame for research and voting. Korean companies are required to hold AGMs within three months after the fiscal year-end and file their meeting circulars at least 14 days before the AGM. While a few companies voluntarily provide proxy materials far in advance, most companies file relevant documents exactly on the mandated deadlines.

Most Korean companies release meeting agendas weeks in advance; however, relevant details regarding the meeting agenda items for shareholder approval are disclosed in meeting circulars. As such,  analysis of meeting agendas often cannot be initiated until 14 to 16 days before the meeting.

Key issues expected to come to the fore this season include:

Sentenced Founding Family Members on the Board

During 2014, two major group chairmen, Chey Tae-Won of SK Group and Lee Jae-Hyun of CJ Group, were sentenced to prison for misappropriating corporate funds and dereliction of duty. While Chey Tae-Won stepped down from all of his board and executive positions at the SK Group–SK Holdings, SK Innovation, SK Hynix, and SK C&C–following the Supreme Court decision, Lee Jae-Hyun still remains on the boards of CJ Corp., CJ Cheiljedang Corp., and CJ Korea Express Corp. as of the latest quarterly reports filed for 3Q 2014.

Shareholder Nominees on the Board

KB Financial Group announced that its board of directors and the nomination committee held a meeting on Jan. 9, 2015, to grant all shareholders the eligibility to nominate potential outside director candidates. According to the disclosure, the introduction of a shareholder-nomination system is part of an on-going project to improve the corporate governance structure of the group. Shareholders who are interested in nominating potential outside director candidates may each recommend one candidate per year. For the company’s upcoming 2015 AGM in March, interested shareholders must submit a recommendation to the IR department by a date still to be set by the company.

Although it is still unclear how effectively the shareholder-nomination process can influence establishing a more independent and effective board, this provides for an opportunity for shareholders to raise their voices and suggest candidates they believe are well suited for the outside director post. Considering that the company has gone through a number of leadership and governance issues in recent years, the establishment of the shareholder nomination process signals a positive step toward improved corporate governance.

KRW 10.6 trillion Property Purchase of Hyundai Group

Hyundai Motor Co., together with several of affiliates including Kia Motors Corp. and Hyundai Mobis Co., purchased land in Seoul for KRW 10.6 trillion on Sept. 18, 2014. Given the appraised land value of KRW 3.3 trillion, a number of investors questioned whether Hyundai Motor Group needed to buy the land at a price three times higher than the assessed value. Executives of Hyundai Motor replied to these concerns stating that Hyundai Motor Group needs to accommodate 30 other affiliates under the same roof to improve efficiency and it intends to establish an automobile theme park to enhance the brand image. Also, an anonymous independent director was quoted in an interview with the Wall Street Journal saying, “Company executives were desperate to persuade the outside directors to approve the purchase at the board meeting. For Hyundai, the land wasn’t just an investment; it was something the company couldn’t afford to lose. In that case, price didn’t matter.”

Explanations provided by the executives and an independent director did not quell investor concern, sending Hyundai Motor, Kia Motors, and Hyundai Mobis shares down by more than 10 percent in days following the announcement of the land acquisition. Investors continued to raise concerns over the companies’ lack of transparency over the transaction and the decision making process. Shareholders have long complained that founding family members exercise disproportionate control over the Hyundai Motor Group relative to their small shareholdings, and many view the land purchase as an example of such undue influence.–Shinbo Won and Kevin Seo, Korea Research