As previously noted, the Korean government held its “Capital Markets Stabilization and Normalization Roundtable” on March 18, 2026, continuing its agenda on corporate governance and capital markets reform (including proposed amendments to the Korean Commercial Code to require the cancellation of treasury shares). The roundtable was chaired by President Jae Myung Lee and addressed measures to strengthen the structural foundations of Korea’s capital markets. Reflecting those discussions, the Financial Services Commission (the “FSC”) announced a package of initiatives titled “Measures to Strengthen Structural Foundations for Capital Markets Stability” (Link).

In its announcement, the FSC underscored the need to foster a corporate culture based on shareholder value, focusing specifically on: (i) prohibition of duplicative listings as a matter of principle; (ii) prevention of corporate value impairment (including by failing to address chronically undervalued shares); and (iii) strengthening the Stewardship Code to enhance oversight function of institutional investors. All three initiatives are receiving significant attention from the market, especially with respect to the scope and timing of their implementations.

With respect to the Stewardship Code (which serves as an important framework for the voting and engagement practices of institutional investors), the FSC made reference to: (i) expanding the breadth of factors to be considered and the scope of application for shareholder engagement; (ii) introducing a third-party review framework and enhancing comparability through consolidated disclosures; and (iii) supporting measures designed to reduce uncertainty for institutional investors.

Reflecting the foregoing, the Stewardship Code Development Committee (the “SCDC”) and its supporting organization, the Korea Institute of Corporate Governance and Sustainability (the “KCGS”), held a public hearing on June 8, 2026 (Link) and subsequently released their proposed amendments to the Stewardship Code.

These proposed amendments warrant close attention, as they are follow-up measures to the FSC’s “Measures to Strengthen Structural Foundations for Capital Markets Stability” initiatives and may also become the first comprehensive set of revisions to the Stewardship Code since its adoption in 2016. The proposed amendments are also notable in that they would further heighten the stewardship responsibilities of institutional investor, including by explicitly incorporating sustainability considerations (such as ESG factors) into the scope of non-financial information. Further details are set out below.
 

 
The SCDC and the KCGS are conducting a public notice and comment period on the proposed amendments to the Stewardship Code from June 8, 2026 through June 26, 2026, and are expected to finalize the contents of the proposed amendments thereafter. While the Stewardship Code is not legally binding and applies only to voluntarily participating institutional investors and other participants, such participants must, under a “comply or explain” standard, generally comply with the Stewardship Code, and to the extent they are unable, sufficiently explain and disclose their reasons for non-compliance and propose alternative methods. Accordingly, once the proposed amendments are finalized, many large institutional investors (such as public pension funds and asset managers) are expected to amend their own stewardship guidelines and their proxy voting policies to reflect the amended Stewardship Code and to strengthen related activities.

In particular, the proposed amendments strengthen overall stewardship and proxy voting practices by: (i) expanding the covered asset classes beyond domestically listed equity to include bonds, infrastructure, real estate and private equity; (ii) requiring institutional investors to establish their own internal standards for stewardship activities; (iii) requiring that institutional investors secure experts and organizational capacity to carry out stewardship activities; (iv) promoting the implementation of concrete stewardship activities based on such standards; and (v) enhancing disclosure and reporting to investors regarding progress made on stewardship activities.

In addition, with respect to the principles governing specific stewardship activities and proxy voting, the proposed amendments: (i) specifically incorporate sustainability considerations and ESG factors; (ii) specifically reflect the expanded scope of directors’ duty of loyalty under the amended Korean Commercial Code; (iii) call for progressive strengthening of institutional investors’ engagement activities and enable collaborative engagement with other institutional investors when needed; and (iv) expand the scope of stewardship activities to include more proactive measures (including review of and engagement on key management matters, submission of shareholder proposals and participation in litigation) and encourage institutional investors to take into account such activities and their outcomes in their investment decisions. Consequently, institutional investors may initiate more concrete challenges and engagements with respect to company’s ESG activities and directors’ fiduciary duties. In this spirit, the number of collaborative engagements and advisory shareholder proposals on key management matters may increase.

Accordingly, there may be significant changes in how institutional investors and activist shareholders exercise their voting rights and carry out stewardship activities at the 2027 annual general meeting of shareholders, especially in light of the proposed amendments to the Enforcement Decree of the Korean Commercial Code regarding electronic shareholders’ meetings that we previously discussed. Therefore, companies should carefully prepare its corporate governance procedures, including adequately planning and managing its investor relations, board meetings and shareholder meetings.

Additionally, as the proposed amendments expressly identify sustainability (including ESG factors) a major item to be considered in institutional investors’ stewardship activities, companies should also carefully review its management systems and response capabilities regarding sustainability issues such as climate change, supply chain management, and human rights.
 

[Korean Version]