Country’s $400 bn National Pension Service pressured to fight incompetence and corruption in listed companies
South Korea’s National Pension Service (NPS), the country’s largest investor, is coming under rising pressure to engage in shareholder activism, according to media reports.
The NPS, which is estimated to own stakes of 5 percent or bigger in 267 publicly traded firms in South Korea, is being pushed to use its position ‒ and in some cases its veto rights over board appointments ‒ to fight corruption in corporate management and work against incompetent board members, the Yonhap News Agency reports, citing unidentified ‘industry sources’.
The service, which is the fourth-largest pension fund in the world with assets under management of about $400 bn, is also facing pressure to increase professionalism and improve business practices at many of the companies it invests in, Yonhap says.
The news service doesn’t say specifically where the pressure on NPS comes from but it does mention that South Korean president Park Geun-hye in her 2012 election campaign said the fund should use its voting rights to help improve corporate governance in the country.
The NPS has stakes in Samsung, Hyundai, SK and LG, South Korea’s four largest companies, worth a combined total of about $42 bn, and also owns shares in units of those four firms that often exceed the stakes held by their parent companies.
The NPS has traditionally steered clear of involvement in management of the companies it invests in, the news agency reports, but it did oppose 12 percent of shareholder proposals at those companies last year, which represents an increase from 5.4 percent in 2008.
‘Listed firms would be barred from helping their money-losing affiliates if the NPS actively exercises its shareholder voting right,’ says Lee Young-kon, an analyst at Hana Daetoo Securities, in an interview with Yonhap. ‘That would help improve corporate governance as well as transparency.’
