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Korean firms face backlash from foreign investors over financial statements

Most of the big Korean companies are facing disapproval from foreign pension funds over their financial statements ahead of their imminent shareholders meetings in March, as they have not been audited by an independent panel.

On Korea Corporate Governance Service’s online website Voting Information Plaza, of the 89 companies that have posted their agenda for annual shareholders meetings, 56 received opposition from more than one foreign pension fund. 


The State Board of Administration of Florida rejected the financial statements of around 20 Korean firms, including Posco, LG Uplus, Hyundai Engineering & Construction, Shinsegae, Hyosung, LG Electronics, Hyundai Motor, Kia Motors, E-mart, Samsung Electro-Mechanics, Samsung SDI and Korean Air.

Canada’s Ontario Teachers’ Pension Plan and British Columbia Investment Management Corp. voiced similar opinions.

The OTPP opposed financial statements of 10 firms saying, “We encourage companies to provide clear, timely, and accurate disclosure of their audited balance sheets. Without a clear indication of audit completion we cannot support this proposal.”

“We will vote against this resolution as we are concerned with the unaudited financial statements,” the BCI also said regarding Amorepacific, Kia Motors, E-mart, GS Retail, Yuhan, Samsung Electro-Mechanics and Dongbu Insurance.

The California State Teachers’ Retirement System, while not specifying reasons, voted against resolutions from most of the Korean firms it has invested in.

By regulation, the Korean firms can notify their shareholders of the annual gathering two weeks prior to the date, while they are obliged to hand in audit reports just one week before the meeting.

The KCGS said this leads to foreign investors being asked their opinion on resolutions based on unaudited financial statements.

Although the firms do supply audited reports ahead of the shareholders meetings, this gives little time for them to review the matters in detail.

Asia Corporate Governance Association has for several years pointed out the need for Korean firms to institutionally improve their audited financial statements.

Regarding the issue, a Korea Exchange representative said the reality of Korean firms is that they have a tight schedule to prepare necessary documents, but this is a closely knit issue with currently enforced commercial and tax laws. It is difficult to push for alternatives, such as postponing the general period of shareholders meetings or notification period.

By Lim Jeong-yeo (
catch table
Korea Herald daum