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| Daishin Securities headquarters in Seoul / Courtesy of Daishin Securities |
Shareholder proposals were blocked during Daishin Securities' general shareholders meeting, Friday, most likely to prevent discussion of increased dividend payments made by U.S. hedge fund SC Fundamental.
A regulatory filing by Daishin Securities showed its shareholders agreed to the company's plan to pay out 1,200 won ($1) in dividends per common stock for its 2020 earnings and to set a maximum limit of 10 billion won in payment to directors.
Before the shareholders meeting, Daishin faced calls by activist shareholders demanding the company raise its dividend payments to 1,500 won per ordinary stock and lower the maximum limit of payment to directors to 5 billion won. SC Fundamental, which owns less than a 5 percent stake in the Korean brokerage, was mentioned as the proposer because the activist fund is also said to have sent Daishin a letter in 2019 seeking larger dividends and the retirement of treasury stocks.
But the request for more dividends has been considered unreasonable, in light of the fact that the securities firm has maintained one of the highest payout ratios among listed firms here. In addition, financial authorities have recommended local financial companies to reduce their dividends to maintain financial soundness amid the COVID-19 pandemic.
Some market insiders speculated that SC Fundamental may have sought to maximize its short-term profit. Over the past few years, the activist fund submitted various shareholder proposals to other companies, including GS Home Shopping and Motonic, asking them to buy back stocks and increase dividends, sometimes without holding enough of a stake to qualify for making such proposals.
From that standpoint, Institutional Shareholder Services (ISS) and Glass Lewis reportedly advised investors to oppose the proposal of increased dividends.
According to industry sources, however, the two global proxy advisers disagreed on the limit of maximum amount of payment to directors, with ISS pointing out that Daishin's owner family has received increased payments, despite the securities firm's low return on equity compared to its local peers.
Concerns therefore existed over the possibility of the U.S. hedge fund achieving part of its goals, but most Daishin shareholders supported management's side.
On the same day, Hyundai Motor Securities and Samsung Securities held general shareholders meetings.
Although the Center for Good Corporate Governance, a progressive proxy adviser in Korea, opposed Hyundai's plan to appoint former Financial Supervisory Service official Yun Suk-nam and KAIST professor Kang Jang-koo as nonexecutive directors, shareholders supported the company. Samsung Securities was also able to reappoint CEO Chang Seok-hoon and appoint former Financial Services Commission Chairman Lim Jong-ryong as a nonexecutive director as planned. The nonexecutive directors from financial authorities are expected to help the two brokerage firms cope with various financial regulations.
