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This article first appeared on Diligent Market Intelligence's Activism newswire. To register for a demonstration and trial of the product, click here.
An interview with Cas Sydorowitz, global head of Georgeson, on how regulatory reforms and shifting investor attitudes are redefining shareholder activism in Japan and South Korea. How has shareholder activism in Asia evolved over the past few years, and what, if anything, distinguishes the current wave of campaigns in Japan and South Korea from what we see in the U.S. and Europe? Shareholder activism in Asia has surged, with Japan and South Korea leading the charge. Both markets have seen heightened levels of activism over the last three years. This increase follows political and regulatory pressure driven by the Tokyo Stock Exchange’s (TSE) push on capital efficiency linked to price-to-book ratio disclosures and South Korea’s Value-Up program targeting the “Korea discount.” In Asia, campaigns often focus on capital allocation, dividends, buybacks, and reducing cross-shareholdings rather than aggressive board control or M&A battles, which are more common in the West. Activism in the region also tends to have a longer duration with limited one-year campaigns as several activists return year after year in their push for reforms. There are also fewer negotiated settlements, which are more common in the U.S. To what extent have corporate governance reforms in South Korea made activism more appealing to funds that have faced a hostile reception on past forays into the country? South Korea’s 2025 Commercial Act amendments represent a significant milestone, introducing directors’ fiduciary duties to shareholders, expanding cumulative voting, and tightening audit committee elections. These changes, alongside the Value-Up initiative, directly address the “Korea discount” by boosting minority protections, transparency, and shareholder returns. The dual pressures of regulation and activism have increased success rates for board representation and value-unlocking proposals. Domestic institutions, including the National Pension Service, are more supportive under the Stewardship Code. Overall, the perception of activism has shifted toward a positive agent for change which is supported by a greater community of local retail investors with their ability to vote online giving them the tools to express their frustration. In Japan, are activist campaigns still primarily event-driven, focused on dividends and M&A arbitrage, or have they given way to more operational and strategic demands? While dividends, buybacks and capital efficiency remain core, fueled by TSE guidance on cost of capital and price-to-book ratios, campaigns can focus beyond pure event-driven plays. M&A activism has yielded the most interesting outcomes with some of the largest companies in Japan acquiescing to the pressures of holdout activists, but many activist campaigns incorporate operational and strategic elements such as questioning deal valuations, pushing for business portfolio reviews, unwinding cross-shareholdings and demanding board accountability. Last year’s proposals demonstrated a growing focus on governance, compensation and board elections alongside returns. Activists have taken ever larger stakes in Japanese companies, regularly holding more than 10% to 15% of the target. This is far higher than positions in the U.S. or Europe. In Japan, activism is more focused on forcing strategic reviews and sale considerations through very significant holdings, as opposed to appointing directors on boards and using them as a Trojan horse to effect change over a longer period of time. Activists don’t buy positions with the intent to start a proxy fight. They buy good companies that they want to help make better. A proxy fight is the outcome of failed discussions or an impasse on how to create value. Have domestic and international shareholders both become more accepting of activism in recent years? Yes, and no. While traditional long investors are more willing to engage with the activists, they are not always willing to support them in a vote. In Japan, some recent activist campaigns failed to get a majority of the vote, despite support from either ISS or Glass Lewis. In many situations, the domestic asset managers are more supportive of the activists in comparison to the foreign investors. Retail has not become a significant factor in many campaigns in Japan, but I expect that to change. In Korea, you have more widespread support from both domestic and foreign institutional investors. The counterbalancing factor is the support from cross holders in that market. Retail in Korea is playing a bigger role and is more often supportive of activists. The transition of retail support in Japan will be a significant factor in how activists achieve success. In Japan, the number of proposals to receive significant support has risen. In Korea, reforms have legitimized activist campaigns. The stigma has faded, replaced by a recognition that activism helps address undervaluation and poor capital allocation or lazy balance sheets. Collaboration is still preferred over hostile attacks. How does ESG and DEI fit into the stewardship activities of major asset managers in Asia against the U.S. political backdrop? In Asia, stewardship remains focused primarily on governance, capital efficiency, and long-term value, areas with strong policy support in Japan and Korea. ESG integration continues where it supports financial outcomes such as climate risk in supply chains or board diversity for better decision-making but it is applied pragmatically rather than ideologically. Against the U.S. pushback on ESG/DEI, Asian asset managers and global investors maintain steady engagement without the politicized rhetoric. DEI appears selectively such as in discussions around board gender diversity in Japan. But overall, stewardship prioritizes fiduciary duties aligned with local regulations over Western-style social mandates. The U.S. pressure has affected the stewardship teams of the largest asset managers and how they engage with companies. That is a global impact originating from the U.S. However, Asia’s reform momentum keeps stewardship positive and less politicized. To what extent are global geopolitical headwinds likely to have an impact on activism in either of the two markets? Geopolitical tensions have limited direct impact so far, particularly in Japan, where activism’s domestic focus on capital efficiency and governance insulates it from external volatility. Campaigns continue at record levels despite broader uncertainties. Part of this outcome is derived from the targets most likely to be attacked by activists which are not the mega-cap companies. If an activist is going after a mid-to-small cap company, they are less likely to be directly affected by geopolitical events. In South Korea, there are more targets in the large-cap space where there is greater sensitivity to regional risks. The Value-Up program ensures more alignment with national interests and provides resilience. Activism in South Korea is increasingly viewed as supporting economic competitiveness rather than foreign interference. Overall, headwinds may slow cross-border deals or M&A-related campaigns but are unlikely to derail the structural drivers: regulatory reforms, undervaluation and shareholder pressure for efficiency. Investors deploying significant trades in an activist situation may be more prone to political risks given the size of the investment and the susceptibility such companies have to global trade, the price of oil and energy, and how the management teams can steer the business through political storms. There may be greater hesitancy to push for reforms at a company that may be sensitive to global trade and energy prices beyond their control. Activism focused on companies less exposed will continue. Preparedness through proactive engagement remains key for companies in both markets.
