[Value-Up Success Factors] ④ Shinhan Financial Group, IR Role Model... Strengthening Shareholder Returns

Announcement of Board Resolutions and Corporate Governance Improvements
Jin Ok-dong, Group Chairman, Leads Overseas IR
Increased Treasury Stock Cancellation... Stock Price Rises 21%

Editor's NoteThe corporate value-up program has been unveiled. It is a policy promoted at the pan-government level to resolve the 'Korea Discount' (undervaluation of the Korean stock market). The key is to provide incentives without penalties to encourage voluntary participation from listed companies. The market expresses disappointment over tax support and doubts the success of the corporate value-up program. Is that really the case? Capital market experts emphasize that the success of the corporate value-up program depends not on tax policy but on the 'will of the listed companies.' The return on equity (ROE) of domestic companies is similar to that of Japan, but the dividend payout ratio is about 10% lower than Japan’s. Unlike U.S. CEOs who meet shareholders directly, Korean listed companies hold formal investor relations (IR) meetings. It is not the listed companies that should demand incentives, but they must respond. It is now time for listed companies to promise shareholders through disclosures what and how they will do to enhance corporate value.

One of the core pillars of the government's 'corporate value-up policy' is efforts to communicate with shareholders (IR). It calls for transparent disclosure of information so that shareholders can properly evaluate the intrinsic value of companies.

Shinhan Financial Group is a representative IR model company among domestic listed companies. It announces the convocation of shareholders' meetings along with the resolutions of the board of directors. Looking at the explanatory materials attached to the 2023 shareholders' meeting disclosures, plans for improving the support organization and system for outside directors in 2024 and group management succession plans stand out. The plan to introduce a responsibility structure by group company includes a schedule for introducing responsibility structures for affiliates. A company official explained, "In addition to explanations of shareholders' meeting agenda items, we include detailed information on the company's response methods and plans regarding internal controls, financial structure, and issues requested by financial authorities," adding, "We have both English and Japanese versions and also deliver the content to investors in the form of shareholder letters."

Efforts to communicate with overseas institutional investors are also notable. Jamie Allen, former Secretary-General of the Asian Corporate Governance Association (ACGA), named Shinhan Financial Group as the most foreign-investor-friendly company in an interview with Asia Economy last month. The company actively communicated with foreign investors from the beginning in the Korean capital market, which was closed off during the late 1990s 'IMF foreign exchange crisis.' In April last year, Shin Ok-dong, Chairman of Shinhan Financial Group, visited Japan as the first overseas IR region after taking office, and in June, toured Europe to attract institutional investors. In May this year, he accompanied Lee Bok-hyun, Governor of the Financial Supervisory Service, on an overseas business trip. He plans to visit the U.S., Germany, Switzerland, and other countries to promote the value-up program.

The shareholder return policy, a key focus of value-up, is also being strengthened. Representative examples include dividends and share buybacks and cancellations. Since the number of shares decreases with share buybacks and cancellations, the value of shares held by existing shareholders increases. After conducting the first quarterly dividend among domestic financial holding companies in Q2 2021, cash dividends have been increasing. The cash dividend amount in 2023 was KRW 1.086 trillion, and the amount of share cancellations was KRW 486 billion. The shareholder return ratio also rose by 6 percentage points from the previous year to 36%. This year, the quarterly dividend amount was equalized to KRW 540 per share, with an annual dividend plan of KRW 2,160.

The stock price has also responded positively to these efforts. As of the closing price on the 9th (to be replaced on the 10th), Shinhan Financial Group’s stock price was KRW 47,750, up about 21.3% from the beginning of the year. Since the corporate value-up program was first mentioned on January 17 (KRW 36,550), it has jumped 30.6%.