As the main shareholders' meeting season approaches, listed companies responding to the demands of minority shareholders are presenting shareholder return plans. Companies that have been passive in communicating with shareholders are now actively moving to restore trust as the wave of shareholder activism intensifies.
Most announced return plans by significantly increasing dividends compared to the previous year or promoting share buybacks and cancellations. Among the listed companies that announced aggressive shareholder return plans, some have seen their stock prices rise significantly. This reflects the expectations for enhancing shareholder value being reflected in the stock price, resulting in a win-win situation for both shareholders and corporations.
DI Dongil, a textile and aluminum company, announced its corporate value enhancement plan on the 10th. It presented 'shareholder friendliness and transparent management' as its medium- to long-term goals, stating that it will restructure its business and improve its financial structure by utilizing idle land. The company plans to establish an audit and ethics management committee for management transparency and also intends to overhaul its internal accounting management system. Additionally, it revealed plans to increase compliance rates for key governance indicators from 20% to 60% and to operate an investment relations (IR) dedicated department.
DI Dongil's value enhancement plan is regarded as more progressive than those of other listed companies. Most listed firms' value enhancement plans, which state that they will enhance shareholder value, focus on short-term measures like increasing dividends or share buybacks and cancellations, which can raise stock prices. However, DI Dongil introduced measures that could fundamentally buoy stock prices by disclosing plans to restructure its business along with improving its financial structure.
DI Dongil has been preparing for this since the second half of last year. The impetus was a shareholder proposal from minority shareholders. Previously, DI Dongil's trading was suspended from November 21 to December 11 last year due to violations of accounting standards. During this period, shareholder activism was active.
Eight minority shareholders, including Shin Min-seok, former vice president of Radfens Partners, filed a request for a temporary shareholders' meeting to replace the audit committee members. Additionally, minority shareholders raised issues regarding the payment of 9.6 billion won in loans between DI Dongil and its largest shareholder, the Jeong Heon Foundation, and the dual roles held by DI Dongil's auditors. Although the proposals from minority shareholders were rejected at the temporary meeting in November, the National Pension Service, which holds 4% equity, supported the minority shareholders.
Subsequently, DI Dongil announced plans to resolve the concurrent positions between the Jeong Heon Foundation and the company, as well as to establish an audit committee consisting only of outside directors. Additionally, it decided to cancel a total of 272.5 billion won worth of shares (6,463,422 shares) from November last year to this month and allocated 0.05 shares per stock as dividends, doubling the amount compared to the previous year. As shareholder action and the company's responses to shareholder returns intertwined, the stock price rose more than 20% within a month after trading resumed on December 12 last year.
DI Dongil is set to address shareholder proposals, including the introduction of a cumulative voting system, the establishment of an audit and ethics management committee, and the selection of directors at the regular shareholders' meeting scheduled for the 28th of this month. The shareholder proposals were presented by Shin Min-seok's side, demanding additional countermeasures. They have also expressed opposition to the establishment of the company's audit committee while recommending candidates for the full-time auditor position. Some express concerns that excessive demands for shareholder returns by a few shareholders may weaken the company's value enhancement momentum.
DB HiTek, a system semiconductor company, also will raise issues at the shareholders' meeting on the 20th regarding the codification of minority shareholder protection, share buybacks, and allowing quarterly dividends. All of these are in response to shareholder proposals. The company announced last month that it would distribute dividends of 1,230 won per common stock, which is double that of the previous year (580 won). The market dividend rate also rose from 0.97% to 2.88%.
DB HiTek has faced demands from minority shareholders for enhanced shareholder return policies in recent years. In response, it announced its value enhancement plan last August. The plan includes maintaining a 30% shareholder return rate over the next five years, separating the roles of the CEO and the chairman of the board, and establishing internal transaction and compensation committees. The stock price saw a significant increase of 55%, rising from an all-time low of 29,200 won on December 9 last year to 45,350 won on the 12th.
Hojeon Limited, a high-performance clothing manufacturer, also responded to shareholders' voices by deciding on a cash dividend of 400 won per share of common stock on the 27th of last month. This is a 5% level of the market dividend rate, increasing from the previous year's amount (300 won per share).
Earlier, an alliance of minority shareholders of Hojeon Limited pointed out underperforming stock prices and demanded shareholder return measures. They also proposed a hardline stance, stating that they would transfer their equity to competitors if their demands were not met. Hojeon Limited publicly stated that it accepted the demands of minority shareholders and signed a trust contract for 3 billion won in share buybacks on the 25th of the same month.
A Hojeon Limited official noted, "We aim to strengthen shareholder return policies through this increase in dividends," and added, "The treasury shares acquired last year will be reviewed for cancellation as soon as the trust contract expires this year, among other proactive shareholder-friendly policies."
While large entities, such as activist funds, have led domestic activism, there are assessments that the focus is shifting toward minority shareholders recently. According to a survey conducted by the Korea Chamber of Commerce and Industry on the impact of expanding shareholder activism released on the 9th, the proportion of minority shareholders and alliances among all proposed shareholders has surged nearly twice from 27.1% in 2015 to 50.7% last year.