iM Securities evaluated on the 3rd regarding Hyosung that "If the duty of loyalty for directors is introduced, holding companies like Hyosung will benefit the most in terms of improving governance." It maintained a buy investment opinion and a target stock price of 60,000 won. Hyosung's previous trading day closing price was 45,700 won.
The manager is a contracting party who possesses information and management capabilities, but shareholders delegate management to the manager, leading to a situation where the interests of the manager and those of the shareholders do not always align, resulting in agency costs. In South Korea, the pursuit of private interests by controlling shareholders possessing management rights has been cited as a cause of agency costs that hinder optimal corporate resource utilization and the distribution of management performance.
Agency costs between controlling shareholders and minority shareholders also arise frequently during corporate restructuring processes. Lee Sang-hun, a researcher at iM Securities, analyzed that "Above all, the greater the private interests of controlling shareholders, the higher the incentive for them to make decisions that prioritize their own interests over those of all shareholders, which contradicts the demand for shareholder returns from general investors."
Recently, the Democratic Party of Korea has proposed a revision to the Commercial Act that includes the 'duty of loyalty for directors.' If such a bill passes the National Assembly, shareholders will be able to directly hold directors accountable for violating the duty of loyalty through the Commercial Act.
The researcher stated, "If the duty of loyalty for directors is introduced, it will change the agency cost structure from controlling shareholders versus minority shareholders," adding, "This means that if a director makes decisions unfavorable to minority shareholders for the private interests of controlling shareholders, legal grounds will be established for holding them liable for damages under commercial law or for breach of trust under criminal law."
He continued, "This could create an opportunity for outside directors to escape the controversy of being merely figureheads," and expressed hope that "decisions made in the board of directors could lead to improved governance."
He further analyzed, "In the case of holding companies like Hyosung, where liquidity discounts are unavoidable due to dual listings of holding companies and subsidiaries, there is a high probability that conflicts of interest between controlling shareholders and minority shareholders will occur. Therefore, if the duty of loyalty for directors is introduced, holding companies like Hyosung are expected to benefit the most in terms of improving governance."