Underappreciated in all of this was the company’s own corporate governance changes — closer to what Paul Singer’s Elliott Management Corp. had wanted Hyundai to do five years ago as part of its activist campaign. The South Korean firm said Tuesday it would pay out at least 25% of consolidated net income to shareholders four times a year (instead of two) from the end of the next quarter and will cancel 1% of existing treasury stock. For shareholders, this is more meaningful than announcements about big spending — an old Hyundai habit (just last week, Hyundai said it was working on a lunar exploration rover) — that doesn’t promise returns for years to come, or futuristic plans that may lift sales eventually.

Looks like Elliott was right. In 2018, when it held more than $1 billion of shares across Hyundai and its affiliates, Singer’s firm had called on the company to streamline the corporate holding structure, cancel treasury shares, return more than 12 trillion won ($11.2 billion) of cash to shareholders and restructure. There were also issues around how the group had valued its assets. Like many South Korean chaebols, Hyundai Motor struggled with an inefficient capital structure and the wider group’s tangled holdings that gave the Chung family far more control than their economic interest. Hyundai voted down the dividend increase proposal but undertook a paltry stock buyback of around 250 billion won.

So why has Hyundai had a change of heart now? For one, the company’s performance has been far better. At the time Elliott was pushing for change, it was facing years of falling operating profit and market share. That gives Hyundai a little more leeway. Its valuation, though, is still sagging: At 5.2 times forward price-to-earnings, it trades at a discount to auto peers both domestically and in Japan. Releasing a stream of positive news, along with cajoling shareholders, can only help boost it.

Financial metrics aside, Hyundai is aligning with President Yoon Suk Yeol’s renewed push to clean up corporate governance in domestic capital markets. These range from detailed plans to increase dividend payouts announced earlier this year by the Financial Services Commission and the Ministry of Justice to proposals around better disclosure. Regulators have revised guidelines to protect minority investors and empower audit committees, while efforts to raise the number of women on boards have intensified. A draft law seeks to fine companies for greenwashing in a push to bring the country in line with global standards.

In response to the pressure of these top-down policy measures, companies have proactively taken shareholder-friendly moves. Hyundai, a flagbearer of Korea Inc., needs to be on board and comply to show support. After all, it has received a fair share of the government’s attention in recent months. The US Inflation Reduction Act had initially shut out the carmaker’s EVs — among the best-selling in the US — from incentives. On Tuesday, in a sign policymakers’ steadfast lobbying efforts had helped, Hyundai executive vice president Gang Hyun Seo said all of his firm’s electric vehicles would “probably be able to” benefit from tax credits in the US from 2026. That’s a powerful motivator to behave like a corporate stalwart. 

For Hyundai, this a big step in the right direction — good corporate governance is a way to protect value. There’s still some ground to cover, though. Returning 25% isn’t particularly generous, and it could do more to restructure units and merge smaller businesses that would increase value for shareholders, much like Elliott had proposed.

To get the valuation boost it needs, Hyundai will have to stay the course: If it can’t keep shareholders happy, then ambitious spending projects and continued performance will be hard to sell.

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This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Anjani Trivedi is a Bloomberg Opinion columnist. She covers industrials including policies and firms in the machinery, automobile, electric vehicle and battery sectors across Asia Pacific. Previously, she was a columnist for the Wall Street Journal’s Heard on the Street and a finance & markets reporter for the paper. Prior to that, she was an investment banker in New York and London

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