Korean Corporate Governance Forum Roundtable. (Image courtesy of Yonhap)
SEOUL, Aug. 20 (Korea Bizwire) — Major foreign institutional investors remain wary of South Korea’s recent corporate governance reforms, citing a legacy of reversals and unmet expectations, according to feedback gathered by the Korea Corporate Governance Forum during investor meetings in Hong Kong and Singapore this month.
Forum Chair Lee Nam-woo, speaking at a press briefing in Yeouido on Monday, said that while recent policy efforts — including amendments to the Commercial Act and shareholder value-enhancing proposals — have drawn some attention, skepticism remains high.
“Many investors expressed a deep-seated mistrust, feeling they’ve been misled over the past two decades by both Korean companies and successive governments,” Lee noted.
Reform Measures Greeted with Cautious Optimism
Investors were broadly supportive of the second phase of the Commercial Act reform, now under consideration by the National Assembly. The bill includes mandatory cumulative voting and an expansion of the separate election of audit committee members for listed companies with assets over 2 trillion won.
Foreign investors welcomed these provisions as meaningful steps toward bolstering board independence and curbing controlling shareholders’ abuses.
Similarly, a proposed law mandating the retirement of treasury shares — a move being pushed by the ruling party — was praised as one of the most robust efforts to improve shareholder value and tackle the longstanding “Korea discount” that weighs on equity valuations.
However, concerns linger over South Korea’s approach to dividend taxation. Investors argued the government’s narrow criteria for dividend tax relief risks deterring long-term investment.
Many called for a simpler framework that rewards shareholders who hold stock for over two or three years. Additionally, some voiced disappointment that inheritance tax reform remains stalled.
Traders at Hana Bank’s main dealing room in Seoul monitor market movements and execute trades. (Image courtesy of Yonhap)
Sharp Criticism for LG, Praise for Hyundai
Among South Korea’s chaebol, LG Group drew particularly strong criticism. Investors cited issues such as LG Electronics’ controversial dual listing in India and the undervaluation of LG Chem compared to its subsidiary LG Energy Solution — whose market cap (90 trillion won) far exceeds that of its parent (20 trillion won).
These governance missteps, they argued, significantly undermine minority shareholder interests.
Samsung Electronics also came under scrutiny, with some investors advocating for a three-way split of its semiconductor, foundry, and consumer electronics divisions to unlock value. A Nasdaq listing of its foundry arm was specifically proposed to enhance global investor exposure.
In contrast, Hyundai Motor Group earned relatively high marks for its corporate governance improvements, particularly regarding board composition at Hyundai Motor and Kia. Still, Hyundai’s share price was labeled disappointing.
With a price-to-earnings ratio (PER) of 5 and a price-to-book ratio (PBR) of 0.5, investors criticized the automaker’s bloated balance sheet and called for financial restructuring.
A Race Against Time
Lee stressed that Korea is in a high-stakes race against regional competitors like Japan, Taiwan, Singapore, India, and even China to become a more shareholder-friendly market.
He warned that foreign investor sentiment is more fragile than policymakers may realize, and reversing entrenched doubts will require sustained public-private collaboration.
More than 50 entities attended the meetings, including sovereign wealth funds from Hong Kong and Singapore and the Asia branches of major Anglo-American funds.
“The distrust is real, and the clock is ticking,” Lee said. “Without swift and credible reforms, Korea risks falling further behind in the battle for global capital.”
M. H. Lee (mhlee@koreabizwire.com)
