The idea of whether or not the shareholders of public firms should obtain access to the firms’ proxy materials has been controversial in the United States. The continual disagreements surrounding proxy access reforms demand the necessity of looking at other countries that already allow shareholder access to a company’s proxy. This article aims to explore the concerns and issues of shareholder proposal rights for corporate elections and shareholder access in South Korea and to provide considerations for an improved regime. Towards this end, this author conducted a case study of the shareholder proposals of public firms listed on the Korea Exchange over the periods 2007 through 2009. The analysis of the data suggests that shareholder proposals for director nominations have seldom been exercised for large public firms, especially chaebols—the large, family-controlled Korean corporate groups. Consequently, the current standards for a gradated shareholder eligibility requirement should be reconsidered, thus enabling shareholder nomination rights to function as an effective means to control agency problems in large public firms. Having cumulative voting systems and voting restrictions in auditor elections entail greater risks that directors or auditors representing special interests may be elected through shareholder nominations. In particular, considering the relatively large number of unsupported auditor nominations, a stricter requirement for auditor candidate nominations might mitigate the disadvantages of frivolous auditor nominations. In terms of nominating purposes, more than half of shareholder proposals were found to be utilized for the purpose of pursuing takeovers of control rights in South Korea, where there is no limitation on the number or qualification of directors to be nominated by shareholder proposal rights. This invites a reexamination of the proper scopes of shareholder nomination rights in conjunction with shareholder proxy access, depending upon the size of nomination. On the other hand, the fact that nominating shareholders frequently conduct a separate proxy solicitation shows that the current regime does not provide a sufficiently effective method for nominating shareholders. Future studies should include the effects of the exercise of shareholder nominations on enhancing corporate governance of the firms.
Corporate Elections and Shareholder Proposal Rights: from Case Studies in South Korea,
U. Pa. E. Asia L. Rev.
Available at: http://scholarship.law.upenn.edu/ealr/vol7/iss2/2