By In-Soo Nam

SEOUL--The failure of a Swiss elevator maker to stop a Hyundai Group company from revising its rules to increase share capital has frustrated foreign investors who want changes to South Korea's corporate governance.

Schindler Holding AG said Friday it voted against Hyundai Elevator Co.'s bid to triple the size of its authorized capital to 60 million shares. Despite the opposition, the plan was approved at the annual general meeting.

"It is regretful that the amendment which will enable Hyundai's management to continue utilizing the company for its own personal purposes and to further harm the interest of the existing minority shareholders has been passed," Schindler said in a statement.

Schindler, the second-largest shareholder of Hyundai Elevator with a 21.5% stake, has said it would boycott Hyundai management's attempt to seek a paid-in capital increase, saying it would hurt minority shareholders.

In expanding the official limit on new shares, Hyundai Elevator can theoretically issue up to 40 million more shares. The company's current market capitalization is 1.37 trillion won ($1.24 billion).

The case reflects the concerns of many foreign investors about corporate governance at Korea's complex, family-controlled conglomerates, known as chaebol. Analysts have said weak governance and a lack of transparency in decision-making have been a key factor in the "Korea discount," which prunes equity valuations in the country.

The Swiss company said earlier this week that Hyundai's proposal to expand its capital base is designed to protect management interests, while diluting minority shareholders' stakes in an effort to "silence" them and keep them from checking the propriety of management decisions.

A Hyundai Elevator spokesman said Friday the revision of the rules is intended to establish legal ground for future financing purposes.

"We don't have any immediate plans to issue rights or new bonds," he said.

Since taking a stake in Hyundai Elevator in 2006, Schindler has been engaged in a series of disputes over the group's capital increases and financial assistance for ailing affiliates.

Investors have long complained about a lack of transparency and outside oversight at many chaebol, which are generally controlled by founding families. Top managers typically wield power in major decisions, such as capital spending, despite having relatively small shareholdings in key operations.

Unlike the U.S., where institutional investors are spearheading shareholder activism, in Korea it has often been foreign investors, who hold a third of Korean equities.

Hyundai Motor Co. was criticized by investors in September when it and two affiliates, Kia Motors Corp. and Hyundai Mobis Co., bought a plot of land for new headquarters in southern Seoul for about $10 billion--three times the assessed value.

Shares in the three companies fell to multiyear lows after the deal.

Write to In-Soo Nam at In-Soo.Nam@wsj.com

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