Experts in the Corporate Finance & Strategy field at Boston Consulting Group (BCG) said business leaders should view activism not as a crisis but as a market signal, advising, "The key is not to wait for the market to discover value, but to find it first and act."
On Korea's value-up program, they said, "There are many corporations with global competitiveness, and if accountability and minority shareholder protection are strengthened through governance and tax reforms, it could catalyze capital inflows and higher valuations."
The following is a Q&A with James Tucker, Jody Foldesy, and Gregory Rice of BCG.
─How have recent activist investing trends changed from the past?
"Activism is no longer a risk unique to some corporations but part of the operating environment for public companies. It is exerting real pressure on corporations experiencing relatively weak performance, inefficient capital allocation, and gaps in investor perception.
Last year, activist campaign activity hit an all-time high, led by the United States and the Asia-Pacific region. About one-third of all campaigns were driven by new activist investors, and the influence of institutional investors on strategy and capital allocation is also expanding. As a result, activist investors secured 120 board seats last year. In addition, CEO turnover within a year after campaigns reached a record high, increasing pressure on management."
─Why do activists target corporations whose performance is not poor?
"Activist investors look for additional upside in corporations with solid fundamentals rather than those with structural problems. In particular, corporations whose businesses are sound but whose share prices lag competitors become primary targets. Because they hold large equity stakes, they prefer corporations with limited downside risk and significant upside potential."
─Are there cases where activism led to improved corporate value?
"The case of Olympus is representative. Olympus collaborated with the activist fund ValueAct Capital to overhaul its governance, incentive system, and capital allocation strategy, and reorganized its strategy around the medical device business. With the perspective of external investors combined with management's execution, it is seen as having led to a re-rating of corporate value."
─What were the success factors in that case?
"It was the result of ValueAct's data-driven approach, the strategic reconstitution of the board, and management's willingness to embrace bold change."
─What is the CEO's top priority in an activist situation?
"CEOs should see activism as a market signal, not a crisis. It reflects the market's judgment that the corporation is undervalued. While there is no need to agree with activists' claims, CEOs must provide a candid diagnosis of the business, an actionable improvement plan, clear performance metrics, and rapid execution so that all shareholders can understand and trust the corporation's value-creation strategy.
─What does it mean to "think like an activist investor"?
"Activism starts with valuation, not strategy. The key is to examine the assumptions embedded in the current valuation, the untapped value, and areas of inefficient capital allocation.
To do this, CEOs need three shifts. First, they should understand value-creation mechanics and run the corporation based on total shareholder return (TSR). Second, they must integrate business, financial, and investor strategies into a single system. Third, they must clearly set out what will change, how much value will be created, and when results will appear.
The key is not to wait for the market to discover value, but to find it first and act."
─How should CEOs understand and manage investors?
"Investors are not a single group but a collection with varied strategies and time horizons. CEOs should shape their shareholder base around investors who support long-term value creation, and because investors demand not only results but also transparency, realism, and a willingness to solve problems, the CEO's credibility is a core asset that protects the corporation in a crisis."
─How do you assess Korea's "value-up program"?
"Japan's governance reforms show that Korea also has substantial potential. Korea has many corporations with global competitiveness, and if accountability and minority shareholder protection are strengthened through governance and tax reforms, it could catalyze capital inflows and higher valuations."
─What is the most important change to resolve the K-discount?
"Investors, regardless of country, demand transparency, accountability, and participation in governance. Structural improvements such as stronger transparency, protection of minority shareholder rights, cancellation of treasury shares, ensuring board independence, and limiting conflict-of-interest transactions are especially important. These will help attract global investors and ease valuation discounts."
─What mindset shifts do Korean CEOs need?
"There needs to be an awareness that beyond running the corporation, there is competition to attract capital. Korean corporations already have a high level of operating capability, but there is still room to improve in dedicating the same level of focus to value creation and capital allocation.
There are four key shifts: from performance-centric to valuation-centric; from sequential decision-making to integrated decision-making; from control-centric to value accountability-centric; and from passive communication to active narrative management. In the end, shareholders are not a reporting target but partners whose trust must be earned continuously."