Although the number of companies participating in Value-Up (corporate value enhancement) disclosures increased last year, most remained perfunctory, with key governance-related items omitted. The disclosures were introduced by benchmarking Japan, yet both company participation and commitment are markedly weaker. There are calls for institutional investors, including the National Pension Service, and the exchange to become actively involved to pressure listed companies.

According to the Korea Exchange, in its ‘March Corporate Value Enhancement Status’ released on the 7th, as of the end of last month a total of 587 listed companies (KOSPI 305, KOSDAQ 282) had completed Value-Up disclosures (based on main disclosures), an increase of 407 from the previous month.

Of these, 405, including Samsung Electronics, qualified as high-dividend companies and made new disclosures. After a late-February revision to the Enforcement Decree of the Restriction of Special Taxation Act, high-dividend companies receiving tax benefits must record, through Value-Up disclosures, that they satisfy the special tax criteria and related details.

The problem is that, belying the very term Value-Up, both participation in and commitment to the disclosures are insufficient.

On the KOSPI, only 36.3% (305 firms), and on the KOSDAQ, only 16.2% (282 firms) participated. At the Tokyo Stock Exchange, which the authorities benchmarked, within 2 years and 1 month of introducing the related disclosure in 2023 (requiring management aware of cost of capital and share price), 92% of Prime Market (top-tier) listings participated. Even 51% of Standard Market listings, the second-tier market, participated, underscoring how low the Korean figure is by comparison.

In terms of substance, most remained merely procedural. Even high-dividend companies included in the Value-Up Index, such as Samsung Electronics, LIG Nex1, JYP Entertainment, and Leeno Industrial, disclosed only brief business plans and dividend payout levels. Although they enjoyed the benefit of inclusion in the Value-Up Index, which admits only outstanding Value-Up companies, their Value-Up disclosures contained only cursory information.

Earlier, because this is the first year of implementing the high-dividend tax preference, the exchange and financial authorities sought to reduce the corporate burden by requiring only core items in the main text, namely confirmation of meeting the special dividend-income conditions, dividend payout targets, and capital expenditures (CAPEX), while leaving the remaining narrative content to company discretion.

In particular, concrete disclosure of governance-related matters, a core element of Value-Up disclosures, and of internal risk factors was lacking. For example, Hanwha Aerospace, which last year raised concerns about shareholder value being undermined due to a large rights issue, and Hanjin KAL, embroiled in controversy over defense of controlling shareholder control, did not include related items in their disclosures. The disclosure guidelines recommend including in disclosures internal risk factors and governance matters that attract strong interest from shareholders and market participants.

This has prompted calls to raise institutional investor participation and for the exchange, as in Japan, to directly pressure listed companies.

Park Sang-in, a professor at Seoul National University, said, “In Japan, the Government Pension Investment Fund (GPIF) actively exercised shareholder rights and pressured companies for change, which drove them to disclose, whereas the National Pension Service is not playing a significant role,” and “The National Pension Service should actively require companies to explain their situation and actions, and ensure this is reflected in disclosures.”

Starting this summer, the Tokyo Stock Exchange plans to request that non-disclosing companies among Prime Market listings publicly state their reasons for not disclosing and their future plans.