Battle Between Activist Funds and Proxy Fight... What Is the Outlook for JB Financial's General Meeting of Shareholders?

Difference of Opinion with Align Partners Continues from Last Year
JB Financial Group Has More Friendly Shares
But Overseas Investors Like National Pension Service and Capital Group Are Key

As financial holding companies' general meetings of shareholders are being held one after another, attention is focused on the JB Financial Group shareholders' meeting. This is because, as in last year, there is a difference of opinion between the activist fund and the current board of directors regarding the appointment of directors. Considering the shareholder composition, the outcome is expected to vary depending on the votes of the National Pension Service and foreign investors.

The JB Financial Group regular shareholders' meeting will be held at 10:30 a.m. on the 28th at the JB Financial Group headquarters located in Jeonju, Jeollabuk-do. The main agenda items include approval of financial statements, whether to increase the number of outside directors, and director appointments.

The key issue is the appointment of directors. Align Partners Asset Management, the second-largest shareholder, began demanding a reorganization of the outside board by recommending one non-executive director and three outside directors in January. JB Financial Group tried to resolve the conflict by proposing to increase the board members by two and recommending candidate Lee Hee-seung, whom Align Partners recommended, at the shareholders' meeting. However, they rejected recommending multiple directors proposed by Align Partners, arguing that it would undermine the board's independence and increase the risk of conflicts of interest. In response, Align Partners stated, "It is the right path for the board to be composed according to shareholders' intentions," emphasizing that fair competition and voting should determine the outside directors.

Align Partners has increased pressure on JB Financial Group. On the 7th, they applied to the Jeonju District Court for the appointment of an inspector for the shareholders' meeting and filed an injunction to prohibit the exercise of voting rights by fintech company Finda. The reason for requesting the inspector's appointment was to examine whether the convening procedures and resolution methods of the shareholders' meeting were appropriate. The injunction to prohibit Finda's voting rights was due to concerns that Finda, considered a friendly force to JB Financial Group, would exercise voting rights over its 0.75% stake.

According to Align, last year JB Financial Group formed a strategic alliance with Finda and invested part of the amount through a new technology investment association managed by JB Investment, a 100% subsidiary. Align Partners claimed this was an illegal method to form cross-shareholding while evading mutual share regulations under the Commercial Act. Ultimately, the court accepted both applications. JB Financial Group stated that it would apply the court's decision to this shareholders' meeting but would seek a more precise judgment through an objection.

Looking at the current JB Financial Group shareholding structure, the variables appear to be the National Pension Service and foreign investors. The largest shareholder, Samyangsa (14.61% stake), has consistently supported the current board, and the third-largest shareholder, OK Savings Bank (9.65% stake), is also expected to vote for the current board this year as it did last year, according to industry views. On the other hand, the Norwegian Government Pension Fund, which owns 2.37% of JB Financial Group shares, sides with Align Partners. It has announced that it will vote against all director appointment proposals recommended by the current board and support all director candidates proposed by Align.

The casting vote lies with the National Pension Service and foreign investors, including Capital Group. Last year, the National Pension Service supported the current board on the dividend proposal but sided with Align Partners on the other agenda items. The largest overseas investor, the U.S.-based Capital Group, has increased its influence compared to last year. At the shareholders' meeting last year, its stake was below 5%, but as of the end of last year, it increased to 5.48%.

With global proxy advisory firms' opinions divided, it has become difficult to predict the shareholders' meeting outcome. Global proxy advisory firms such as Glass Lewis and ISS issued reports recommending opposition to Align Partners' director appointment demands, stating they were inappropriate. In contrast, the domestic proxy advisory firm Sustainvest recommended supporting Align Partners' shareholder proposals for new outside director appointments, citing that they are more suitable in terms of enhancing the board's monitoring function.