Dutch investment giant APG has begun what it describes as an “ambitious policy engagement” with South Korean lawmakers on giving shareholders the right to file non-binding proposals.
Yoo-Kyung Park, APG’s head of APAC responsible investment and governance, told Responsible Investor that the €627 billion fund officially started engaging with South Korea’s legislature, the National Assembly of Korea, in May.
She added that APG plans to expand its engagement efforts to South Korea’s Ministry of Justice and the country’s financial regulators and companies.
Shareholders in South Korean firms can currently submit binding proposals which, if passed with the required super-majority, can force a company to amend its articles of incorporation to accommodate their request.
“This means a simple ESG ask must go through an unnecessarily complicated process,” Park said, adding that it also makes the process more adversarial than it needs to be.
“From the corporate’s perspective, the regulations around shareholder proposals are very restrictive: once a shareholder proposal is submitted and the company does not agree with the suggested agenda, the board must table them as shareholder agenda, which immediately create unnecessarily escalated tension between the company and the shareholder, leaving little scope for compromise among them. This is not healthy.”
APG want South Korean lawmakers to amend the country’s commercial law so that shareholders can file proposals on an advisory basis, leaving the company to ultimately decide whether to accept them or not.
The investor kick-started its efforts in May at a seminar hosted by members of the National Assembly of Korea where APG “strongly advocated” for the need to amend the law, Park said.
She described the effort as “an ambitious policy engagement”, but added that the potential impact on the market could be “enormous”.
The reaction to the idea has been “mixed” so far, Park told RI. Both companies and regulators are concerned about the potential that firms will be hit with a deluge of proposals at their annual general meetings, some of which might be malicious. Park said that such fears are “exaggerated” in APG’s view.
APG has been engaging with South Korean firms, including Samsung, Hyundai Steel and Posco Chemical, as part of its Climate Focus 10 programme, through which the investor aims to engage with the 10 largest emitters in different Asian markets, with the goal of driving down their emissions.
This proxy season, APG also co-filed a climate lobbying proposal at Toyota, calling on the Japanese carmaker to annually review the impact of its policy advocacy efforts and its alignment with the Paris Climate Agreement.
It drew the support of 15 percent of shareholders last month. Like in South Korea, had it reached the supermajority threshold, Toyota would have been forced to amend its articles of association.
APG’s director, responsible investment and governance, Sara Lee told RI that it doesn’t want to use changing of articles as a “standard approach, [not least] because shareholders often vote against changing articles of corporations automatically”.