Legal Action Taken Against Rejection of Advisory Shareholder Proposal
Changhwan Lee of Align Partners: "Transparency in Executive Compensation Is Key to Enhancing Corporate Value"
On March 3, Align Partners Asset Management announced that it has taken legal action against Gabia, which rejected a shareholder proposal recommending the public disclosure of director compensation.
On this day, Align Partners stated, "On February 27, we filed for a preliminary injunction to have the proposal included on the agenda at the Anyang Branch of the Suwon District Court." This action stems from a series of advisory shareholder proposals made to five companies-Gabia, Coway, Dentium, SoluM, and APLUS Asset-ahead of this year's regular general shareholders' meeting.
The shareholder proposal recommends that, starting from the 2026 fiscal year, the board of directors annually disclose detailed compensation information for directors and key executives, along with the basis for calculation, in the corporate governance report or a separate compensation report. It is known that, except for SoluM, the remaining companies either refused to put the proposal on the agenda or explicitly expressed opposition.
Align Partners has long expressed concerns that it is difficult to verify how the disclosure of executive compensation at domestic listed companies is linked to business performance or shareholder value. The current disclosure structure is said to lack the specificity of major overseas markets and fails to clearly show the relationship between company performance and compensation.
Gabia argues that, since there is no provision in the articles of incorporation to support such an advisory shareholder proposal, and since matters not specified in the Commercial Act or the articles of incorporation as resolutions cannot be subject to shareholder proposals, it is refusing to put the item on the agenda based on this interpretation.
Song Sunghyun and Noh Jonghwa, attorneys at Hannuri Law, who are representing this injunction case, explained, "Since Article 12 of the Enforcement Decree of the Commercial Act enumerates the reasons a company may refuse a shareholder proposal in a limited way, rejecting the inclusion of an advisory shareholder proposal on the grounds of academic controversy alone is an excessively narrow interpretation of shareholders' rights to make proposals under Article 363-2 of the Commercial Act."
They further stated, "Align Partners' shareholder proposal is not unrelated to the purpose of the general shareholders' meeting, but in fact concerns director compensation, which is a purpose stipulated by the Commercial Act. Even if the proposal is approved, it does not bind the authority of the board of directors, so it does not infringe on the board's exclusive authority. Rather, by confirming the consensus of shareholders and communicating it to the board, the general shareholders' meeting is fulfilling its original function, making this a legitimate exercise of shareholder proposal rights."
Changhwan Lee, CEO of Align Partners, said, "Recently, financial authorities have been working to enhance the substance of executive compensation disclosures, and both domestic and overseas institutional investors are considering the correlation and transparency between compensation and performance as important investment criteria. In this context, the intent of this shareholder proposal is to establish an institutional foundation for enhancing the company's long-term corporate value and strengthening shareholder trust. Through this injunction, we hope shareholders will be able to freely discuss this proposal at the general shareholders' meeting."
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