South Korea unveils guidelines for ‘Corporate Value-up Programme’

SEOUL (Reuters) – South Korea’s financial regulator on Thursday proposed detailed guidelines for companies if they choose to participate in the government’s reform programme aimed at enhancing shareholder value.

The announcement is a follow-up to the government’s “Corporate Value-up Programme” first proposed in February that is intended to help tackle the comparatively low valuations seen in the domestic stock market.

This so-called “Korea discount” refers to a tendency for local companies to have lower valuations compared with global peers due to factors such as low dividend payouts, and the dominance of opaque conglomerates known as chaebols.

In remarks prepared for Thursday’s announcement, Kim So-young, vice chairman of the Financial Services Commission, said: “It guides companies to select key indicators that are seen as important for enhancing corporate value based on the characteristics of each firm, set mid- to long-term objectives, and devise various plans regarding investment, shareholder return and business portfolio reorganisation.”

The guidelines provide principles and examples of how companies can establish their own plans for improving shareholder value and ways to submit filings to communicate with investors about the plans.

It is recommended that companies submit filings on their plans each year, but it will be up to companies to decide whether they want to participate in the programme and use the guidelines to set up such plans and submit filings, according to the announcement.

Since the government first proposed the reform programme in February, many market watchers have argued that authorities should consider stronger measures, such as tax cuts as incentives or penalties for companies that do not join the scheme to ensure change.

Under the campaign, listed-companies face no binding policy measures so far to boost their dividends. Since the first proposal was met by disappointment from investors in February, the has come off a 22-month high hit prior to the announcement.

The guidelines will be finalised by the end of the month so that companies can start submitting filings when they are ready, the FSC said.