Subscribe
E-Paper
.jpg/dims/resize/740/optimize) |
By Nam Hyun-woo
The move by the National Pension Service (NPS) to more actively exercise its shareholder rights has sounded the alarm at many listed companies, which fear the state-run pension fund could interfere with their management, corporate officials said Monday.
They expressed concerns that the move may be an attempt to influence management at certain companies, calling for countermeasures to prevent the pension operator from "excessively engaging" in corporate issues.
Last week, the NPS held a committee meeting and said it will actively exercise its rights as a major shareholder in Korean Air and its de-facto holding firm Hanjin KAL. The NPS is the second-largest shareholder in Korean Air and the third-largest in Hanjin KAL.
Should the pension operator exercise its rights during the two companies' shareholder meetings in March, it will be the first time for the NPS to apply its stewardship code.
Adopted in July, the stewardship code allows the 637 trillion won ($565 billion) fund to be more active in corporate affairs, such as appointing outside directors or replacing auditors if shareholder value is seriously undermined at the companies it has invested in.
According to the NPS, its stewardship code will target companies in which it has more than a 5 percent stake. As of last year, the fund has more than 5 percent in 297 companies, which include big names such as Samsung Electronics, SK hynix and POSCO.
"Given the fund's huge influence in companies, its stewardship code comes as a burden to them, especially because of the pension operating committee's decision making process," an industry official said.
The committee, which is the top decision making body at the NPS, is headed by Minister of Health and Welfare Park Neung-hoo. The 20-member committee also includes five public officials, including four vice ministers of economy-related ministries.
Its subcommittee, which will decide on the range of the NPS's exercisable rights, is also comprised of members named by the minister, meaning the decision making process could be heavily influenced by the government.
"Nine out of 14 members of the subcommittee sided with the administration, and the pension operating committee also seems to be a yes man for the government," said Cho Dong-keun, an emeritus professor at Myongji University. "The committee seems to be an unfair playground leaning toward the government."
Over the NPS's move on Korean Air and Hanjin KAL, Cho said it has failed to distinguish between shareholder activism and moral punishment, and more companies will see a situation where their socially or morally suspect practices are put on the agenda at shareholders meetings.
The application of the stewardship code to Korean Air comes amid public criticism of Hanjin Group Chairman Cho Yang-ho and his family for their misdeeds and alleged illegal activities.
"Shareholder activism should be limited to a company's financial issues, and not motivated by political or social occurrences," he said.
The Korea Employers Federation (KEF) also said the NPS's engagement in non-financial matters may be an infringement on corporate independence and every step should be transparent and fair.
"The U.K., Japan and other advanced economies introduced stewardship codes before Korea and are still seeing controversies over their effectiveness," a KEF official said. "Korea should also regularly monitor the use of the code, and come up with measures to ensure the pension operating committee's independence."
