U.K.-based hedge fund Palliser Capital formally submitted shareholder proposals to LG Chem, demanding steps to boost shareholder value. The move comes about four months after it disclosed key proposals in Oct. last year.
Palliser Capital is known to be holding more than 1% equity in LG Chem on a long-term basis, and the shareholder proposals were filed ahead of the regular shareholders meeting in March.
In a shareholder letter released on the 10th, Palliser Capital pointed to issues related to governance, management transparency, and capital allocation at the LG Chem board, arguing that these factors undermine shareholder trust and are a major reason LG Chem's share price trades below its net asset value (NAV).
The proposals include amending the articles of incorporation to allow advisory shareholder proposals to be formally placed on the agenda at the shareholders meeting and calling for regular disclosure of the NAV discount rate. They also propose overhauling the executive compensation system to a KPI-based structure that reflects the NAV discount rate and return on equity (ROE).
In addition, it recommended that LG Chem reduce its equity stake in LG Energy Solution (79.38%) to at or below the current target of 70% and pursue an active capital allocation policy of buying back and canceling treasury shares with the funds secured through the reduction.
The proposal to amend the articles also includes introducing a "lead independent director system." Under this structure, an independent director serves as the representative of the board to act as a bridge with shareholders and focuses on fulfilling obligations under the recently revised Commercial Act.
Palliser Capital emphasized that the proposals align with the government's policy direction to normalize the capital markets, particularly to resolve the "Korea discount." Palliser Capital added that if LG Chem accepts the proposals, it can become a company that both serves investors' interests and leads the intent of government policy.
Meanwhile, Palliser Capital Chief Investment Officer James Smith is also well known for having led Asia-Pacific investments at U.S. hedge fund Elliott Management, which opposed the merger of Samsung C&T and Cheil Industries in 2016.