A big day for Samsung shareholders

    There have been no prominent success cases of investor activism in the modern history of corporate Japan.

In recent years, a hedge fund with a 10 percent stake in industrial robot-maker Fanuc Corp. managed to get the firm’s reclusive management to agree to higher returns and dividends. Share prices shot up, handing shareholders some handsome gains.

But that’s about as far the story goes.

While Japan did suffer from a so-called “lost decade,” the positive corporate restructuring that is happening now is mostly coming from within, not from outside influence.

The situation is somewhat different in Korea, a country that had to weather a financial crisis that shook the economy to its core. That was when the Korean corporate sector was laid bare for foreign investors to pick and choose from.

While the changes in corporate governance that have since taken place are welcome in many aspects, they have also left many undesirable investment precedents.

One new precedent is about to be set tomorrow.

On Friday, shareholders will cast a vote for the proposed $8 billion merger between Samsung C&T and Cheil Industries. If they vote yes, U.S.-based hedge fund Elliott Management will have lost, although it has yet to be confirmed how much profit it would make from its Samsung shares.

Some say the scales are already tipping toward the Korean conglomerate, but of course, we shall have to wait for the final results. Especially so, as there are many shareholders out there -- holding about two-thirds of Samsung C&T shares -- who have yet to speak up. These include institutional, foreign and individual investors.

So everyone who is involved is no doubt going through last-minute soul-searching, weighing up the pros and cons. 

It’s pointless now to analyze the purpose or intent of the deal, which was blatant from the start. And whether the merger will be detrimental for Samsung is also beside the point because it can be either detrimental or beneficial, depending on how the merged entity is honed.

What we need to know now is what the results will mean for the investors and for the Korean corporate landscape.

In most plausible scenarios, Elliott will gain. But what about the others who were just as involved, if not more so?

Regardless of the outcome, this case should be a warning for firms to show more respect for shareholders and their capital, which actually keeps the corporate sector going. At the risk of sounding like a broken record, better dividends would go a long way in smoothing over ruffled feathers and highlighting the companies’ commitment to their shareholders.

Companies should also take heed that they are no longer simply “Korean” enterprises, but are global firms with an international reach and audience.

What this reputation means is that nobody knows when they will be faced with the next Elliott. And when they do, resorting to petty nationalism just will not cut it. So in order to gain legitimate support, the Korean firms must get their act together.

The latest battle also provided a golden opportunity to show investors just how much they matter -- that they actually do hold the key in important corporate decisions. 

In the end, it does boil down to money. Many will be holding their breath for tomorrow’s vote on just how much they will lose or gain from the outcome. 

By Kim Ji-hyun(jemmie@heraldcorp.com)