The Financial Supervisory Service is driving the establishment of a culture where investors know a company's dividends and dividend amounts before making investment decisions.
On the 19th, the FSS announced that it has created a mandatory section in the business report form for companies to indicate whether they will participate in the trend of improving dividends.
This amendment follows the announcement last year by the Financial Services Commission and the Ministry of Justice to align domestic corporations' dividend procedures with global standards. At that time, our corporations allowed investors to invest without knowing how much dividends they would receive after confirming the dividend rights holders.
After the announcement of improvement measures, the percentage of companies specifying dividend amounts before determining dividend rights holders has increased to 42.3% (1,008) among all KOSPI and KOSDAQ listed companies. Nevertheless, the financial authorities determined that many corporations are still implementing dividends according to existing practices.
In response, the FSS has changed the format of business reports. Currently, business reports require disclosures regarding dividends in three areas: ▲ dividend policy ▲ dividend indicators ▲ dividend history. The dividend policy refers to the company's policies regarding dividends or any limitations on dividends. The dividend indicators section records total dividend amounts, dividend payout ratios, dividend yields, and dividends per share over the most recent three business years. The dividend history must include continuous dividend periods or the average dividend yield over the most recent three or five years.
The issue is that most companies tend to use generic statements when describing their dividend policy or simply copy their articles of incorporation. There is no mention of whether they will implement the dividend procedure improvement measures.
Consequently, under this amendment, companies will be required to document whether they will conduct dividends during the reporting period, the date of dividend confirmation, the status of setting the dividend reference date, and whether they will provide predictability regarding dividends. They must also write details about the decision-making body for dividend amounts in their articles of incorporation, the feasibility of implementing dividend procedure improvement measures, and future plans.
In alignment, the Korea Listed Companies Association and the KOSDAQ Association will create a guidance page on the dividend criteria of listed companies. This aims to help investors easily understand the company's dividend reference date, dividend decision date, and types of dividends.
The FSS urged, "Companies that have already revised their articles of incorporation should determine dividend amounts and the shareholders entitled to dividends from this year’s settlement of account, and those that have not yet revised their articles should participate in the improvement of dividend procedures."