Hyundai share price steady, to improve governance after shareholder pressure

Hyundai Motor Co gave into shareholder pressure and agreed to consider a proposal to establish a committee that will protect the interests of investors.

At a shareholder meeting in South Korea an official from APG Asset Management, which holds a stake in Hyundai, asked the carmaker to make changes in its governance structure in order to improve its relationship with shareholders.

The Netherlands-based pension fund proposed Hyundai to set up a corporate governance committee and appoint one of its external directors to protect the interests of existing and future shareholders.

The move comes six months after Hyundai agreed to purchase land for $10 billion, or three time its appraised value, in the wealthy district of Gangnam, Seoul in order to build new headquarters. The board of the company discussed the deal twice and approved it before knowing the price. After the land deal, Hyundais shares took a huge hit, reflecting the disapproval of shareholders.

Following the deal, the board tried to calm investors by lifting dividends and launching a share buyback program. However, Hyundais shares remain 20% down since the land deal.

“I hope this incident will give an opportunity for Hyundai Motor to improve its governance structure in a rational manner,” Park Yoo-kyung, director of APG said, cited by Reuters.

The event of a shareholder voicing his concerns is a rare sight in South Korea and most annual meetings go without any disturbances. However, a trend may be arising as investor activism was above usual levels at Samsung Electronics’ annual meeting as well.

Chief Executive Kim Choong-ho, who chaired the meeting, said that the company would strongly consider any proposals which aim to defend the interest of minority shareholders. Despite minor setbacks, shareholders voted in favor of all affairs that were discussed at the meeting.

South Korean companies have been put under additional pressure lately from both investors and the government. A number of executives have been imprisoned or charged for unlawful activities while the government imposed new tax laws that are aimed at preventing big enterprises from stacking up cash. Meanwhile, shareholders are asking for higher returns and better governance.

Hyundais shares did not change on Friday and closed at ₩172 000 in Seoul, marking a one-year decrease of 24.89%. The company is valued at ₩38.88 trillion.