South Korea's Financial Services Commission has introduced guidelines for companies interested in taking part in the government's reform program, which aims to enhance corporate value. The Corporate Value-up Program, launched in February, seeks to tackle the issue of the "Korea discount," where Korean companies are undervalued compared to international counterparts, partly due to lower dividend payments and the presence of opaque conglomerates called chaebols.
The guidelines, presented by vice chairman Kim So-young, guide companies in selecting key indicators for boosting corporate value unique to their characteristics, setting mid- to long-term goals, and developing strategies for investments, shareholder returns, and restructuring business portfolios. Companies will have the autonomy to determine their participation in the program and decide whether to utilize the guidelines to create and disclose plans to enhance shareholder value annually.
Market observers have suggested that the government should consider stronger incentives, like tax breaks, or penalties for non-participating companies to drive change within the Corporate Value-up Program. As part of this initiative, companies are not currently subjected to mandatory measures to increase dividends, leading to disappointment among investors following the program's initial proposal in February and subsequent market decline post-announcement. The FSC plans to finalize the guidelines by the end of the month, allowing companies to commence submissions of their plans once they are prepared.