Shareholder Activism Goes Global

Financial News, November 23, 2003 | Go to article overview

Shareholder Activism Goes Global


Byline: Kit Bingham

Western investors are increasingly willing to flex their muscles in their home markets as companies such as Carlton, Telecom Italia or Hollinger International can testify.These investors are learning to engage in aggressive shareholder activism in far-flung markets as well. In the most recent example of global activism, a fund manager from Monaco has urged fellow western investors to replace the board of a leading South Korean company.

Sovereign Asset Management, which counts the reclusive Chandler brothers as its principals, is spearheading efforts to replace the board at SK Corp, the flagship company of Korea's third-largest conglomerate.

James Fitter, chief operating officer of Sovereign, wants SK Corp investors to register their shares by the end of next month in order to vote at the company's annual meeting in March, when six of the 10 directors will stand for re-election. "We are trying to put together an alternative board to give shareholders a choice," said Fitter. Institutions that support Sovereign's action include Hermes, the UK fund manager, and Templeton, the US emerging markets specialist.

Fitter points to a long record of financial and ethical mismanagement at SK Corp as justification for replacing the board. The company wants to bail out an affiliate, SK Global, after it reported the country's largest accounting fraud. Sovereign argues that the $850m ([euro]680m) rescue, which would wipe out SK Corp's 2003 earnings, makes no commercial sense and is only being put forward because the Korean business and banking elite cannot afford a large corporate failure. Fitter said: "Strong parts of the group support the weak parts and shareholders get the short end of the stick. We are talking about a large fraud."

Three directors of SK Corp, including Chey Tae Won, the chairman, have been convicted of fraud. Each continues to serve on the board and Chey retains his grip on the company. "The board believes it has the right to call the shots in any way it sees fit. …

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