Shareholder Proposal Approval Rates Decreasing
No Disclosure of Specific Evidence or Reasons
"Active Exercise of Voting Rights Needed for True Value Up"
The Korea Corporate Governance Forum stated in a commentary on the 20th, "For corporate value-up, the most fundamental aspect is the interest and participation of shareholders, and the National Pension Service and asset management companies, which manage the funds of tens of millions or hundreds of millions of citizens, must pay the most attention." They added, "To prevent the precious assets of the people from being depleted due to blind, illogical, and baseless exercise of voting rights, the National Pension Service and asset management companies must faithfully exercise their voting rights and be encouraged and equipped to fully disclose the grounds for their voting decisions."
According to data analyzed by the forum together with its member companies, the approval rate for shareholder proposals by the top 10 asset management companies, based on the amount of stock managed whose voting records are disclosed, has been decreasing year by year. The approval rate for shareholder proposals was 60% in 2022, 32% in 2023, and sharply dropped to 23% in 2024. In particular, some major asset managers had a 0% approval rate for shareholder proposals at the 2024 general meetings of shareholders.
The National Pension Service also did not disclose specific reasons or grounds for exercising voting rights when it supported the significant large-scale merger between Samsung C&T and Cheil Industries, which was directly linked to the people's retirement funds. At this year's general meetings, except for some agenda items of KT&G, Taekwang Industrial, and DB HiTek, the National Pension Service opposed all shareholder proposals from Samsung C&T, JB Financial Group, Kumho Petrochemical, and Hanmi Science. The disclosed reasons for opposition were limited to brief statements such as the board's proposal being judged to better align with long-term shareholder value.
The forum stated, "There is no explanation as to on what grounds and why the board's proposal was judged to better align with long-term shareholder value than the shareholder proposals," and added, "As fiduciaries managing the assets of the people and clients on their behalf, it is a natural duty for the National Pension Service and asset management companies to exercise voting rights at general meetings in a way that benefits their clients." They also pointed out the failure to disclose specific grounds and reasons for supporting or opposing agenda items.
In overseas cases, Japan's public pension fund (GPIF) requires delegated asset managers to actively exercise voting rights and disclose detailed records. Accordingly, Japanese asset management companies faithfully exercise voting rights and disclose detailed records. According to statistics published by GPIF (from April 2022 to March 2023), the approval rate by asset managers for shareholder proposals regarding the appointment of external auditors among domestic Japanese stocks reached 43%. GPIF's delegated asset manager, Asset Management One, disclosed three months of voting records on its website, and the file was as long as 228 pages.
The forum said, "Specifically, even if the fund's weighting is small, voting rights could be mandatorily exercised on competing agenda items that significantly impact shareholder value. There could also be measures to immediately disclose detailed grounds for voting decisions upon exercising voting rights, and methods for companies as well as asset management companies to compile and disclose shareholders' voting records to provide information to investors." They added, "True value-up will be possible when institutional investors actively and thoughtfully exercise their voting rights in such an environment."
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