Dear Foreign Investors, You’re Still Not Welcome: Love, Hyundai Elevator

Hyundai Elevator Proves The Point, Once Again
This obscure little clip appeared in the English version of Maeil Kyoungjae (Everyday Economy/Economics). However, what isn’t written is more important than the news itself.

Shareholders Have Rights, Ya Know
To onshore Koreans, this is a new concept. Entirely new. There is no concept that shareholders are actually owners of the company. They have rights to vote for or against the Board of Directors of the company. In turn, the Board has management rights over large directional policies of the company. When large, influential shareholders demand something, then they can either vote for new management, or sell their shares.

Outside Korea, Large Shareholders Can Influence Companies
Slowly, Korean companies are learning about this new concept. Management of Korean chaebol, by and large, own very little stock in the companies they run. That is shocking, and pitiful. If management doesn’t own shares of the company, can it be relied upon to act efficiently from a financial point of view? Same thing can be said for senior employees. Instead, expense accounts and insufficient financial controls are rampant. The ones that pay for these improprieties? Shareholders.

Why Does This Matter?
It matters because onshore, Korean citizens have not participated in the enormous gains on the global stage made by the largest chaebol. The reason? Koreans don’t own enough equity in their employers. Why? Part of that is due over-reliance on real estate investments (which have done very, very badly in Korea over the past 5 years), and part of that is fundamental mistrust of the chaebol’s handling of financial matters.
It matters because offshore, investors aren’t going to tolerate this type of activity by Korean companies, and will not stop until either they cause turmoil at companies, or sell their shares. Either way, the pre-existing shareholders will suffer.
Belligerent Korean sentiments do exist onshore. “Screw the foreigners, and get out” is an attitude that does exist. However, the shortsightedness of this cannot be understated. An insular Korea cannot grow beyond its borders. Korean companies require larger markets to pursue, and that requires capital, some of it will need to be obtained outside of Korea. Cooperation with foreign companies and investors will also be required.

Hyundai Elevator Should Comply With This Request
When the second largest shareholder asks for information, it should be given. It has the financial right to ask. As the article points out, Schindler cannot overturn the board since it doesn’t have the votes. It can sell its shares at once, however. When there are more sellers than buyers, what happens to the price of anything? It goes down. Who suffers? Existing shareholders. Simple as that. So either Hyundai Elevator management is hiding something (bad), or it wants to disregard international norms when it comes to shareholder rights (also bad). Hyundai Elevator should comply, and now.