ESG

• Former Samsung executive attempted to construct replicated factory 1.5 km away from Samsung Electronics’ Chinese plant by stealing technology
• Prosecutors described this case as a leakage of “core national technologies”
• This technology theft incident falls under the category of risk oversight, and currently, Samsung Electronics’ company risk is rated at an extreme level of 4.0

• The few positive disclosures suggest that there are few positive companies. The question is how much progress companies will make in efforts on gender gap disparity over the next year.
• To eliminate this gap, companies need to quickly realize that human resources are valued fairly as human capital, without gender distinction, and used as a resource for growth.
• Now that stock prices have become a key measure of management, pressure from investors influencing stock prices is more effective. Deep analysis of human capital disclosures is required of investors.

• The “appointment of one female director at prime market company,” which 80% of companies have achieved, is an easy goal, but it’s impossible to ensure board diversity with one woman.
• There is concern that this “effort target without penalty” will give companies an escape route for not promoting board diversity, even with the lax target of 30% by 2030.
• Half of companies that set goals regarding female employees, but a few companies set goals regarding the %/number of board members and disclose “diversity” in skill-matrix for appointing board members.

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess Yanlord Land’s ESG as “Adequate”, in line with its Environmental, Social and Governance scores. Controversies are “Immaterial” and Disclosure is “Strong”.

• Since a few companies include ROE and ROIC as KPIs in their mid-term management plans and present compelling measures, now is the time to promote shareholder returns in short-term measures.
• Companies that expect stock price to rise should ensure that they make progress on the issues that overseas investors are focused on (improving profitability, corporate governance, capital allocation and disclosures).
• Companies with foreign ownership in 30% range are expected to work on issues of interest to overseas investors, while companies with low foreign ownership take indifferent response to shareholder proposals.

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess Wynn Macau’s ESG as “Adequate”, in line with its Environmental, Social and Governance scores. Controversies are “Immaterial” and Disclosure is “Adequate”.

• A legal conflict over the brewing method has emerged between Seven Broi Brewery, the former manufacturer, and Daehan Flour Mills, the trademark holder.
• The court’s decision on Seven Broi Brewery’s injunction request could impact the production and sale of Gompyo Wheat Beer, with a competitor ready to enter the market.
• This incident falls under the category of ‘Anti-competitive Practices’ risks, and currently, Daehan Flour Mills’ company risk is rated at a medium level of 1.3.

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
Sappi’s ESG is “Strong”, driven by its “Strong” Environmental and Governance scores. The Social score is “Adequate”. Controversies are “Immaterial” and Disclosure is “Strong”. 

Sappi is a constituent of the FTSE4Good Index. All of the company’s regions (Europe, North America and South Africa) received a Platinum rating from EcoVadis for corporate social responsibility in FY 2022. The Platinum rating recognises the Top 1% of companies evaluated by EcoVadis.

• There is concern about how well one female board director’s opinion will be respected in management discussions among the large number of male board members.
• Since the pool of female managers in companies hasn’t grown, Corporate Governance Code will remain an “effort target” rather than a specific numerical standard for the ratio of female executives.
• The government does not want to spark discussion of a “quota system” in the “political” field, so discussions of introducing a “quota system” for female board members are not realistic.

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess H&H International’s ESG as “Adequate”, in line with the “Adequate” Environmental, Social and Governance scores. The Social pillar has the highest weightage, given the nature of the business. Controversies are “Immaterial” and Disclosure is “Strong”.

• Erstwhile Citibank India’s retail customers are high-income, high spending and demand excellent customer service
• In FY2022, as per the latest data, Axis Bank has the dubious distinction of becoming the customer complaints market leader in private sector banking
• If Axis Bank does not improve its customer service, erstwhile Citibank’s lucrative retail customers will flee to competitors

• Ottogi Corporation not only achieved remarkable revenue and net income growth in 2022, but also maintained an ESG rating of A for five consecutive years.
• Ottogi demonstrates strong sustainability performance, with high scores in “Environment Policy”, “Chemical Management”, and “Human Rights, Shared Growth & Community”.
• Ottogi’s 10-year dedication to environmental management is evidenced by tangible data, demonstrating remarkable achievements in the management of greenhouse gas (GHG) emissions, energy usage, water consumption, and waste recycling.

• Many companies that cannot make significant investments in growth will reduce cash from their balance sheets through shareholder returns, and ROE+DOE will continue to reach high levels in FY2023.
• A company with a P/B of less than 1x for a long time should consider the option of going private after weighing the costs and benefits of being listed.
• Although most of the shareholder proposals will be rejected unless the foreign ownership is very high, whether the voting rights of domestic institutional investors will change remains to be seen.

• The essence of problem lies in the fact that even half of them believe that ROE doesn’t exceed cost of capital, yet managers haven’t taken measures to address this problem.
• In reality, management reform is still a long way off, as constructive proposals from shareholders are often not accepted until the % of foreign shareholders rises to the 30% level.
• TSE has made it possible to compare the superiority of management skills with share price. Attention will be focused on how managers will answer questions about share prices at AGMs.

• Zee Entertainment Enterprises (Z IN) ‘s tussle with the regulators and legalities seem to be perpetual in nature.
• SEBI’s interim order highlights the abuse of promoters’ position in the company in order to siphon-off funds, ultimately benefiting the promoter family. SEBI has directed promoters to resign as directors.
• Since the irregularities are now being made public, eyes now would be on the proposed Zee-Sony merger, which could further be delayed.

• Overseas investors have called for increasing the ratio of variable compensation to executive compensation. Given that foreign ownership ratios have remained high, this upward trend is expected to continue.
• Few companies use capital efficiency like ROE as KPIs for variable compensation, which is consistent with the fact that few companies set them as numerical targets in mid-term management plans.
• The role of independent directors has become more important as more companies are involving compensation committees in the compensation determination process since the 2001 amendments to the Companies Law.

• Hanmi Pharmaceutical and Hanmi Science have demonstrated consistent financial performance through aggressive R&D investments, with significant achievements based on internally developed products in 2022.
• The new leadership structure of the company has the potential to improve corporate governance transparency, but there is a need for further shareholder-friendly changes, such as expanding dividend policies.
• Overall, the company’s current status, valuation, and ESG performance trends indicate positive prospects, including transparent management practices, sustained investment in R&D, and plans to enhance dividend policies.

• EXO’s Chen, Baekhyun, and Xiumin filed a complaint to the Fair Trade Commission (FTC) on June 4 against SM Entertainment for “abuse of superior bargaining position.”
• SM Entertainment repeatedly faced sanctions by the FTC for disputes, including controversy and conflicts with another boy band ‘Dong Bang Shin Ki’ (TVXQ) 
• The risk to their working conditions continues to increase, with SM Entertainment’s corporate risk currently standing at 4.2, reaching an extreme level.