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Biz News Korea(Eng)

Activist fund meddling reduces employment, slows growth

Collected: 2024.03.21

Distributed: 2024.03.22

Source: Go Direct

[Photo by Yonhap]

A new report from South Korea found that activist fund involvement in companies reduces employment and slows growth. The report indicates that activist funds, known for their active management involvement in companies to improve performance and structure, could undermine these objectives by focusing on short-term gains.

The Federation of Korean Industries (FKI) revealed its findings from an analysis of successful cases of intervention by the top 10 activist funds in the United States on Wednesday. The analysis covered 67 companies worldwide that were subject to activist fund intervention between 2018 and 2019.

According to the report, the number of employees at the intervened companies decreased by 9.9 percent from an average of 53,977 in 2019 to 48,609 the following year. The downward trend in employment continued in 2021 with a recorded number of 45,930 employees. In contrast, the top 100 global companies by market capitalization in the S&P500 index saw an increase in their workforce during the same period.

The report also highlighted a deterioration in growth and profitability indicators among the companies influenced by activist funds. A comparison between 2019 and 2020, the year following intervention, showed a decrease in revenue by 10.5 percent and a 15.6 percent decline in facility investment.

By Kim Hee-su and Minu Kim

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