[Q&A] Lee Bok-hyun "Doosan, Unlimited Correction Requests if Amendment Report is Incomplete"

After the Asset Management CEOs Meeting on the 8th: Backbriefing
"Sufficient Information Needed for Shareholders' Decision-Making"
Encouraging Leading Large Corporations to Participate in Value-Up Disclosures

Lee Bok-hyun, Governor of the Financial Supervisory Service, is delivering opening remarks at the 'Financial Supervisory Service Governor-Asset Management CEO Meeting' held on the 8th at the Korea Financial Investment Association in Yeouido, Seoul. Photo by Kang Jin-hyung aymsdream@

On the 8th, Lee Bok-hyun, Governor of the Financial Supervisory Service (FSS), stated regarding Doosan Group, which has been criticized for going against the value-up (corporate value enhancement) efforts, "If there are deficiencies in the amended report, we will request corrections without any limit on the number of times."

Governor Lee explained during a back briefing after the CEO meeting of asset management companies held at the Korea Financial Investment Association in Yeouido, Seoul, in the morning, "We have received the amended report from Doosan Robotics," adding, "The basic principle is to review whether the initial securities report submission lacked necessary information regarding the effects of the restructuring, decision-making process, and risks, which are essential for shareholders' decision-making."

Twenty-three asset management company CEOs attended the morning meeting. Governor Lee urged the asset managers to actively exercise their voting rights under the stewardship code in line with the government's value-up policy. The asset management companies conveyed to the authorities the practical difficulties and the need to supplement institutional shortcomings in exercising voting rights. They also mentioned recent cases where the protection of minority shareholders' interests failed.

The following is a Q&A with Governor Lee Bok-hyun.

-There is significant dissatisfaction among minority shareholders regarding the merger of affiliates between Doosan and SK Group. Do you see this as a flawed practice?

▲Before answering, I would like to earnestly request two things from CEOs of listed companies or major shareholders. First, regarding the voluntary disclosure of the value-up program mainly conducted through the stock exchange, I ask leading companies in the industry to actively recognize its necessity. The government authorities aim to advance the capital market through voluntary measures and tax incentives rather than inducing corporate behavior through regulatory methods. In a situation where legislative or policy proposals are rampant, I believe it is necessary for companies to empathize with the needs of the times and for large corporations and leading mid-sized companies, which can be considered representative companies of Korea, to participate, thereby building trust that companies are in harmony with the public and general shareholders.

Second, I ask CEOs and major shareholders to facilitate smooth communication with shareholders. Many overseas investors, the general public, and institutional investors currently complain that IR is conducted at the operational level. Large companies like Nvidia, Apple, and Tesla have CEOs who actively share company value and future growth strategies with the market, thereby building trust. If we had such communication, misunderstandings about our leading companies could have been greatly dispelled.

Our basic stance is to carefully review whether sufficient information necessary for shareholders' various decisions, including exercising shareholder rights, has been provided regarding the effects of Doosan's governance restructuring, the decision-making process, and the resulting risks. Although we are currently reviewing, if there is any deficiency, the FSS's agreed position is to continuously request corrections without limiting the number of times. I believe the direction of shareholder protection and corporate value enhancement may not be significantly different. To enhance corporate value, cultural and habitual improvements that consider shareholder interests are necessary.

-What is the status of the delisting criteria for zombie companies, which were mentioned as a penalty for capital market advancement?

▲We are discussing measures to strictly enforce listing maintenance and delisting criteria at the stock exchange and to expedite the procedures. For zombie companies whose market capitalization has significantly fallen compared to the time of listing or whose trading is almost non-existent, general shareholders have no means to exit, and it is questionable whether it is appropriate to maintain such companies that enjoy the benefits of the listing system without responsibility. I think it is desirable to discuss this along with various matters, including the reform of the stock exchange market system. I will consult well with Chairman Kim (Byung-hwan) and create a forum to discuss how to implement such awareness of the issue.

-Regarding the financial investment income tax (Fin-Income Tax) scheduled to be implemented in January next year

▲There is a question about whether it is appropriate to treat investment income and dividend income similarly to interest income. Although a 20% tax rate is imposed under the Fin-Income Tax, collective investment schemes are subject to a 50% tax rate on distributed profits, raising concerns about whether this aligns with the trend of trusting experts and making long-term indirect investments.

-In the current situation of a sharp stock price decline, how does the financial authority view the situation and what direction will be taken to seek solutions?

▲Although the Deputy Prime Minister and the Financial Services Commission Chairman have spoken on this topic several times, I mention it again because it is an important issue. The current sharp stock price decline is considered an unusual phenomenon as it is not accompanied by a sharp downturn in exchange rates, money markets, or the real economy, unlike past crisis situations. Compared to times when there were fundamental problems, this seems to be more related to supply-demand and psychological factors. Regarding policy tools, several measures related to short-term supply-demand were used in July 2022 and 2020. We are well prepared for such matters. To improve the vulnerabilities of the Korean market, we will accelerate institutional aspects such as the Fin-Income Tax issue and the value-up program.

-Regarding the notice of cancellation of weekly (day market) stock trades by the US alternative trading system (ATS) Blue Ocean the day before, was there any prior guidance from the FSS?

▲We have guided Korean securities firms to allow orders through multiple routes rather than a single route. However, since a large number of orders were concentrated at a specific time in this case, I suspect that the issue occurred due to technical reasons, but the technical aspects need further verification. Nevertheless, even if profits that could have been obtained were not realized, and whether gains or losses occurred must be examined, I think there is responsibility on the securities firms simply because the individual's autonomous investment decision was infringed. We will clarify the cause-and-effect relationship and, if the securities firms are responsible, resolve the matter through voluntary adjustment.