Palliser Capital Submits Shareholder Proposal for LG Chem AGM
Palliser Capital (“Palliser”) announced the submission of a shareholder proposal for LG Chem, Ltd. (“LG Chem”) ahead of its Ordinary General Meeting (AGM) scheduled for March 2026. Palliser also shared a letter with LG Chem’s Board highlighting governance, transparency, and capital allocation shortcomings, which have contributed to a persistent and unsustainably large discount to NAV and eroded investor trust.
This follows years of constructive engagement by Palliser to address LG Chem’s KRW 60 trillion (US$41 billion) value gap, as outlined in its October 2025 LG Chem Value Enhancement Plan.
Proposal Overview
The proposal allows shareholders to provide input on near-term measures to reduce the LG Chem discount and improve governance. Key objectives include:
- Amendment to Articles of Incorporation: Allow shareholders holding at least 0.5% of shares for six months to propose non-binding advisory resolutions at the AGM and future meetings.
- Advisory Recommendations:
- Quarterly disclosure of LG Chem’s discount to NAV.
- Review of executive compensation to include stock-based incentives and KPIs linked to NAV discount and Return-on-Equity.
- Capital allocation plan update to reduce LG Chem’s stake in LG Energy Solution (LGES) below the current 70% target to fund share buybacks.
- Lead Independent Director: Appointment of a lead independent director to represent independent directors and improve shareholder engagement, aligning with recent Korean Commercial Code reforms.
Palliser views these measures as critical to enhancing transparency, aligning management with shareholders, and unlocking intrinsic value.
Engagement History
Palliser has consistently engaged LG Chem over several years, holding 12 meetings and submitting eight detailed letters and presentations to identify the root causes of the Company’s valuation discount. Key areas of concern include:
- Erosion of shareholder trust and corporate governance weaknesses.
- Lack of alignment between management and minority shareholders.
- Absence of a return-focused capital allocation framework.
- Limited action to unlock value in LGES.
Despite presenting a comprehensive Value Enhancement Plan, Palliser has been denied meetings with the CEO, Chair, or independent directors, limiting constructive dialogue and prompting the submission of the shareholder proposal.
Shared Investor Concerns
The issues identified are widely recognized among LG Chem investors. Institutional investors, both domestic and international, have expressed strong support for Palliser’s Value Enhancement Plan, which emphasizes:
- Board effectiveness and independent oversight.
- Management incentive alignment.
- Robust capital allocation and shareholder return strategies.
- Use of LGES stake to fund buybacks and enhance intrinsic value.
These expectations align with Korea’s national agenda to reduce the “Korea Discount” through governance reforms and improved shareholder protections, offering LG Chem an opportunity to lead by example.
Persistent Challenges
LG Chem’s spin-off and separate listing of LGES between 2020–2022 caused substantial losses for minority shareholders and remains a major governance concern. Despite the passage of time, management has not sufficiently addressed the LG Chem Value Gap, which now represents the widest discount among Korean conglomerates.
Recent updates on corporate value-up plans have underwhelmed investors due to:
- Lack of acknowledgment of the scale of the NAV discount.
- Insufficient targets, timelines, or metrics to evaluate progress.
- Limited transparency on capital allocation, particularly the underutilized LGES stake.
- Absence of clarity on compensation alignment with shareholder interests.
Investors remain frustrated by the Company’s preference for dividends over buybacks, missing a significant opportunity to unlock shareholder value through increased effective ownership of LGES.
Comparisons with Korean Peers
Other major Korean conglomerates, such as SK Square, Hanwha Corporation, and Samsung Electronics, have proactively addressed NAV discounts, enhanced transparency, and linked executive compensation to performance metrics. These initiatives have narrowed the average NAV discount by approximately 12% over the past year. In contrast, LG Chem’s discount has only narrowed by 3%, highlighting a lag in value-up efforts.
The Company’s dismissal of the relevance of NAV further disconnects it from investor expectations and peer trends, reinforcing the need for shareholder input through formal mechanisms.
The Case for Broader Shareholder Dialogue
Palliser emphasizes the importance of opening the debate to all shareholders, given limited private engagement opportunities and unresponsiveness from the Board. Current channels primarily involve the CFO and IR team, leaving many investors without a voice.
The proposal introduces structured mechanisms for shareholder feedback, ensuring that all stakeholders can express their views on critical corporate governance and value-enhancement initiatives without disrupting management discretion.
Proposed Agenda Items
1. Articles Amendment to Enable Advisory Resolutions
Shareholders would vote to allow minority shareholders to propose non-binding advisory resolutions at the AGM and future meetings. This globally recognized mechanism ensures minority voices are heard and strengthens board accountability.
2. Advisory Recommendations
If the Articles amendment passes, shareholders would vote on the following advisory recommendations:
- Quarterly disclosure of NAV discount.
- Executive compensation review incorporating stock-based incentives and NAV-linked KPIs.
- Capital allocation plan update to reduce LGES stake below 70%, funding buybacks.
These recommendations are non-binding, collaborative, and aim to enhance transparency, management alignment, and capital allocation discipline.
3. Articles Amendment to Appoint a Lead Independent Director
Shareholders would vote to require the Board to appoint a lead independent director from the independent directors. This director would:
- Represent independent directors and facilitate Board-shareholder engagement.
- Gather shareholder input on key policies and capital allocation.
- Enhance Board effectiveness and ensure fiduciary responsibilities are met.
This mechanism strengthens governance and aligns LG Chem with best practices in Korea and globally.
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