[Interview] "Landmark Moment" Korean Shareholder Activism to Be Covered in Harvard Business School Course

Professor Charles Wang of Harvard Business School
Case Study Highlights Shareholder Activism in the SM Entertainment-Align Partners Case
Corporate Governance Cited as Key Factor Behind the 'Korea Discount'

"It represents a landmark moment in Korean corporate governance. I plan to teach it next Spring in an elective course at Harvard Business School."

The shareholder activism case of Align Partners, a domestic asset management firm that initiated changes in SM Entertainment’s governance with less than a 1% stake several years ago, has been selected as a case study for use in classes at Harvard Business School, widely regarded as the world’s top business school.

Professor Charles C.Y. Wang of Harvard Business School recently explained in a written interview with The Asia Business Daily, "The Align Partners-SM Entertainment case stands out for its homegrown nature and focus on Korea, where activism has been particularly challenging due to entrenched control structures like chaebols and circular shareholdings." Most classes at Harvard Business School are conducted using such case studies. The school has highlighted the rapid growth of Korean shareholder activism as a global example of business innovation.

Originally from Taiwan, Professor Wang is a financial expert who has long focused his research on corporate governance, activist investors, mergers and acquisitions (M&A), corporate valuation, and shareholder activism. He has also authored papers on the transparency of Korean chaebols and corporate governance, demonstrating his ongoing interest in the Korean capital market.

Professor Charles Wang, Harvard Business School

Professor Wang stated, "Changhwan Lee's campaign, with just a 0.9% stake, successfully pressured SM to terminate a controversial royalty contract with its founder, Lee Soo-man, and strengthened governance practices."

He further emphasized, "Its setting in the K-pop industry, a non-traditional arena for activism, adds further uniqueness," adding, "This David vs. Goliath story demonstrates activism's potential in markets where shareholders are often beholden to dominant founder-owners."

The case study, published in the Harvard Business Review earlier this year, covers not only the process in which Align Partners in 2022 demanded the appointment of an auditor at SM Entertainment and improvements to internal transactions with Lee Soo-man’s private company, but also the company’s acceptance of these demands, as well as a diagnosis and analysis of the persistent 'Korea discount' in the Korean capital market.

The case study titled "Align Partners and SM Entertainment: Korean Shareholder Activism Meets K-Pop," published in the Harvard Business Review earlier this year, will be used as a teaching material for a course at Harvard Business School next spring.

Professor Wang plans to teach this case study in the "Business Analysis and Valuation" elective course at Harvard Business School next spring. He stressed, "It highlights how evolving factors-such as increasing retail investor participation, regulatory reforms, and the persistent Korea discount-make the potential success of shareholder activism of broader importance to Korean capital markets."

Regarding structural changes in the Korean capital market over the past decade, he noted, "Structurally, the transition to holding-company structures has largely eliminated circular shareholdings and brought far greater transparency to inter-corporate ownership relationships." However, he also pointed out, "From the perspective of family control, however, not much has changed." He added, "If anything, the shift to holding companies may have further solidified chaebol families' grip over their group firms."

Professor Wang particularly noted, "This trend stands in stark contrast to the emergence of a more shareholder-friendly ecosystem, driven by recent presidential administrations' policies, the retail-investor revolution, and the rise of local activism." Although recent amendments to the Commercial Act and other policy changes have fostered a more shareholder-friendly environment in the domestic capital market, he candidly expressed uncertainty about whether this will be sustained in the long term. This suggests that it is unclear how much actual corporate governance practices will change solely through capital market policy reforms.

As the primary cause of the so-called Korea discount, he first pointed to issues of corporate governance. Professor Wang stated, "Improving minority legal protections is the most urgent starting point" for resolving the Korea discount, adding, "Next, tackling capital inefficiency will lift return on capital and narrow valuation gaps."

As a lesson from Japan’s capital market reforms for Korea, he emphasized 'continuity.' He said, "Japan's experience shows that real change requires continuous reinforcement, management·board education, and alignment across policy domains." This implies that Korea, too, must approach governance reform as a cultural shift built collectively by all market participants, rather than as a one-off event.

Additionally, Professor Wang expressed confidence that cases involving Korean companies will be increasingly featured in the curricula of global business schools, including Harvard Business School. He commented, "Over the last two decades, Korea has been one of the most innovative countries in the world-not only technologically (e.g., semiconductors, EVs, AI) but also culturally (K-pop, K-dramas, gaming)."