South Korea's top big-business lobby group wants safeguards to protect companies from attacks by what it calls speculative foreign capital, after a U.S. hedge fund almost derailed an $8 billion merger of two Samsung Group firms this month.
South Korea’s top big-business lobby group wants safeguards to protect companies from attacks by what it calls speculative foreign capital, after a U.S. hedge fund almost derailed an $8 billion merger of two Samsung Group firms this month.
The Federation of Korean Industries, which counts top companies including Samsung Electronics Co Ltd and Hyundai Motor Co as members, said South Korea should adopt measures such as dual-class share structures and poison pills, which exist in many countries.
“Regulation for defending management rights must be improved to ensure that local companies can boost their value and that of all shareholders from a long-term perspective,” the business lobby said in a statement on Thursday.
Some South Korean media and business industry leaders including Park Yong-maan, who heads the Doosan Group conglomerate and the Korea Chamber of Commerce and Industry, have been calling for similar measures in recent weeks.
The calls came amid a rare activist campaign by U.S. hedge fund Elliott Associates against the all-stock merger of Cheil Industries Inc, the de facto holding company of the Samsung Group, and Samsung C&T Corp. The chaebol, controlled by the founding Lee family, narrowly prevailed in a landmark proxy battle.
Jeong Kab-yoon, a member of the ruling Saenuri Party and the parliament’s deputy speaker, said this week that he is preparing to submit a bill to bolster local companies’ defences against foreign funds.
In 2010, South Korea’s government submitted poison-pill legislation to parliament but was thwarted by opposition from some lawmakers and civic groups criticising the measure as only for the benefit of the chaebol families, whose dominance of the economy is resented by many Koreans.
Kim Sang-jo, a leader of activist group Solidarity for Economic Reform, said the latest proposals were unlikely to win serious consideration as lawmakers would be wary of pushing controversial legislation ahead of parliamentary elections next year.
It could also be difficult for blue-chip companies to win shareholder support for adopting such measures, Kim said, given high levels of foreign ownership in companies such as Samsung Electronics.
Chang Sea-jin, a business professor at the Korea Advanced Institute of Science and Technology, said that South Korean laws allowing interlocking shareholding structures already enable chaebol families to maintain control, despite often small direct ownership stakes.
“Adopting something like dual-class shares would be basically adding a measure that favours the families on top of what is already a favourable system for them,” he said.