Curious about the history of corporate governance through various institutional investments, I read a book titled “Investing Like a Business: Shareholder Activism.” To me, shareholder activism means not just passively holding stocks but maximizing one’s interests through various shareholder rights. This process can benefit oneself alone or all shareholders together, though sometimes it results in worse outcomes than passive holding.
Regardless of the outcomes, I found that speaking up as a shareholder is not easy. Most companies have means to defend their management rights, and the people in their boards or management are there for a reason, even if they have shortcomings. Thus, it feels challenging for minority shareholders to assert their positions. Like replacing a settled stone with a rolling stone, shareholder activism involves going into well-defended territories and stirring things up, which inevitably leads to problems. While reading, I was reminded of Alfred Adler’s “The Courage to Be Disliked,” and truly, figures like Benjamin Graham, Warren Buffett, and Carl Icahn embody this courage.
I’ve come to realize anew that there are no clear answers to governance issues, prompting further contemplation. When power is concentrated in specific individuals, decisiveness and implementation speed certainly increase. However, this can overlook certain factors and make it difficult to check personal moral hazards. Conversely, since shareholders directly have stakes, they can evaluate responsibly. Yet, they might make myopic judgments or decisions based on limited information or expertise. Realistically, it seems feasible to adopt the strengths of both sides while minimizing the weaknesses, leading to three practical approaches:
- Aligning the interests between shareholders and the management/board,
- Carefully composing the management/board/investors as recommended in the book, which resonated deeply with me that great companies are built through the efforts of shareholders, board members, and executives.
- Maintaining mutual trust but also having clear penalties for breaches of trust (contracts, legal frameworks).
Certainly, compared to the United States, shareholder activism in South Korea is just beginning to mature. For the Korean investment market to develop and handle more significant capital flows, such discussions, examples, and legal frameworks need to mature. Observing various incidents in the Korean capital market where shareholder interests are compromised, I think these cases gradually erode the trust in the Korean capital market.
When I first felt that the financial environment was immature, I thought about investing in U.S. stocks. However, after reading this book, I reconsidered and realized that, to activists, Korean stocks might seem like an undervalued market. This path requires immense courage to be disliked and execution ability, but since nothing comes easy, someone will see this as an opportunity.
