Experts in the Corporate Finance & Strategy field at Boston Consulting Group (BCG) said businesspeople 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 yourself 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 BCG's James Tucker, Jody Foldesy, and Gregory Rice.
─How have recent activist investing trends changed from the past?
"Activism is no longer a risk borne by only some corporations, but part of the management environment for listed corporations. 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 led by new activist investors, and institutional investors' influence on strategy and capital allocation is also expanding. As a result, activist investors secured as many as 120 board seats last year. In addition, cases in which the chief executive officer (CEO) is replaced within a year after a campaign reached a record high, expanding pressure on management."
─Why do even corporations with decent performance become targets of activism?
"Activist investors look for additional value-upside potential not in structurally troubled corporations but in corporations with solid fundamentals. In particular, corporations whose businesses are sound but whose share prices lag peers become primary targets. Because they typically 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 structures, and capital allocation strategy, and to refocus its strategy on the medical device business. As the perspective of an external investor 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 reconfiguration of the board, and the willingness of management to embrace bold change."
─What should be the CEO's top priority in an activist situation?
"Activism should be taken as a market signal, not a crisis. It reflects the market's judgment that the corporation is undervalued. There is no need to agree with the activist investor's claims, but to ensure all shareholders can understand and trust the corporation's value-creation strategy, a candid diagnosis of the business, an actionable improvement plan, clear performance metrics, and rapid execution are necessary.
─What does it mean to 'think like an activist investor'?
"Activism starts not with strategy but with valuation. The key is to examine the assumptions embedded in the current valuation, the underutilized value, and the areas of inefficient capital allocation.
To do this, the CEO needs three shifts. First, understand the value-creation architecture based on total shareholder return (TSR) and run the corporation accordingly. Second, integrate business, finance, and investor strategies into a single system. Third, clearly set out what will be changed, 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 yourself first and act."
─How should a CEO understand and manage investors?
"Investors are not a single bloc but a collection with diverse strategies and holding periods. A CEO should shape the shareholder base around investors who support long-term value creation, and because investors demand not only performance but also transparency, realism, and a will 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 reform case shows that Korea also has significant 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. In particular, structural improvements such as greater transparency, protection of minority shareholder rights, cancellation of treasury shares, ensuring board independence, and limiting related-party transactions are important. These will help attract global investors and ease valuation discounts."
─What mindset shifts do Korean CEOs need?
"There needs to be recognition that this is competition to attract capital, beyond operating a corporation. Korean corporations already possess high levels of operating capability, but there is still room to devote the same level of focus to value creation and capital allocation.
There are four key shifts: from performance-centered to valuation-centered; from sequential decision-making to integrated decision-making; from control-centered to value accountability-centered; and from passive communication to active narrative management. In the end, shareholders are not a reporting target but partners whose trust must be continually earned."