With the decision to begin rehabilitation proceedings for JR Global REIT on hold and an extraordinary shareholders meeting set for Aug. 4, securities firms have taken the unusual step of guiding retirement pension investors through the proxy voting process.
Mirae Asset Global Investments and Samsung Asset Management, which hold equity through exchange-traded funds (ETF), are also reviewing whether to exercise their voting rights, and some say this extraordinary meeting will be a test of whether the stewardship code (fiduciary duty of institutional investors) is being carried out.
◇ Korea Investment & Securities Co., Mirae Asset, NH, KB証券 notify DC and IRP investors of proxy voting for the shareholders meeting
According to the investment industry on the 29th, Korea Investment & Securities Co., Mirae Asset Securities(006800), NH Investment & Securities, and KB証券 informed customers who hold JR Global REIT through defined contribution (DC) retirement pensions and individual retirement pension (IRP) accounts of the extraordinary shareholders meeting schedule, agenda items, and how to exercise voting rights via text and email on the 27th–28th. Because stocks in retirement pension accounts are managed under a trust structure, it is difficult for customers to vote directly through the Korea Securities Depository's electronic voting, and securities firms determined they must separately confirm and compile customer intentions.
This notice by securities firms is not a routine procedure. A Mirae Asset Securities official said, "Since we began the retirement pension business, a case like JR Global REIT is virtually the first," and noted, "We introduced a method to collect for-or-against responses via a text L.I.N.C to confirm customer intentions more clearly."
NH Investment & Securities and KB証券 also said they provided guidance to protect customers after comprehensively considering the shareholders meeting agenda, customers' holdings, and the process for exercising rights in trust accounts.
◇ Mirae Asset and Samsung Asset Management become the casting vote at the extraordinary meeting
At this extraordinary meeting, an agenda item to appoint three other nonexecutive directors proposed by the minority shareholders alliance will be put to a vote. The item is an ordinary resolution that requires a majority of the voting rights of shareholders present and at least one-fourth of the total issued shares in favor.
JR Global REIT has a total of 197,376,000 issued shares, so at least 49,344,000 shares must vote in favor for the item to pass. As of the end of March this year, the only holders with an equity stake of 5% or more were Mirae Asset Global Investments (8.51%·16,801,183 shares) and Samsung Asset Management (5.05%·9,962,889 shares).
The equity held by the two managers amounts to about 54% of the minimum number of shares needed for passage. That is why some say the outcome of this extraordinary meeting could be significantly affected.
Mirae Asset Global Investments and Samsung Asset Management are currently internally reviewing whether to exercise voting rights on the item. Samsung Asset Management is said to have sought opinions from multiple proxy advisory firms, including the Korea Institute of ESG Standards.
◇ Focus on asset managers' role amid regulators' push to strengthen voting rights
Since this year, financial regulators have been calling for active proxy voting on investee companies and stronger fiduciary responsibility, including disclosing the results of stewardship code compliance reviews and evaluations for asset managers.
Kim Bo-young, a senior researcher at the Korea Capital Market Institute, released a report on the 13th titled "Expansion of the ETF market and asset managers' proxy voting," noting, "Given their management characteristics premised on long-term holdings, passive funds face limits in exerting influence through selling," and analyzing, "Corporate engagement and proxy voting are key tools for boosting long-term corporate value."
However, the researcher pointed out that 42.4% of domestic managers have a practice of uniformly listing more than half of their reasons for voting as formal phrases such as "minimal impact on the shareholders meeting" or "no infringement of shareholder rights." Kim said, "Among 67 public asset managers, only 18 operate dedicated organizations for exercising shareholder rights, and there are wide gaps in organization and staffing, creating practical constraints on active fiduciary activities."
Against this backdrop, some say the JR Global REIT extraordinary meeting could become a case that shows whether asset managers are carrying out the stewardship code. A securities industry official said, "In the JR Global REIT case as well, since the ultimate investors in the equity held through ETFs and the like are individuals, the question is whether the relevant asset managers will actively cast for-or-against votes at this extraordinary meeting."
The minority shareholders alliance has consolidated about 16% equity so far. Through this extraordinary meeting, it aims to seat shareholder-recommended directors on the board to conduct due diligence on overseas assets and loan contracts and to tighten oversight of management.
Meanwhile, JR Global REIT, Korea's first overseas real estate listed REITs, applied for corporate rehabilitation proceedings in April after failing to pay principal and interest on 40 billion won in bonds due to a decline in the asset value of the Finance Tower in Brussels, Belgium, and the occurrence of a cash trap (funds freeze). The Seoul Bankruptcy Court has extended the consultation period for JR Global REIT's Autonomous Restructuring Support (ARS) program until the 14th of next month.