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By Nam Hyun-woo
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| National Pension Service Chairman Kim Sung-joo |
They said the NPS' decision-making structure is not independent from government influence, thus the plan may result in "pension fund socialism" by which the state can influence private businesses through the fund.
During a public hearing Wednesday, the Ministry of Health and Welfare revealed "guidelines" for the NPS on exercising its shareholder rights for the purpose of participating in management.
According to the guidelines, a voting subcommittee under the NPS' Fund Management Committee will decide whether to exercise the rights to demand the dismissal of board members and executives, or to change a company's articles of association.
After gathering public opinion, the Fund Management Committee plans to decide on use of the guidelines later this month.
The NPS said it will exercise its shareholder rights on companies that are "suspected of violating laws or continuously oppose NPS suggestions." Intervention in such companies will come only after "enough communication," and be limited to a certain level, it added.
Businesses are expressing concern over the possibility of "shareholder activism" by the NPS.
"Since last year's announcement on the stewardship code, businesses have expressed concern that side effects will outweigh the desired outcome unless there is a change in the NPS' decision-making structure," an official at one of Korea's top five business groups said on condition of anonymity.
"With the Fund Management Committee being chaired by the health minister, there is no guarantee that the NPS can make decisions independent of the ruling administration."
In October, the Korea Capital Market Institute (KCMI) announced a study on shareholder activism conducted by the pension fund and suggested the NPS scrap the dismissal of board members from its guidelines.
Instead, the institute suggested the NPS opt for the so-called "Wall Street Walk," in which the pension fund sells its stake in a company it is at loggerheads with. However, the NPS dismissed the suggestion.
"In terms of specialty, accountability and independence, the current NPS structure has shortcomings," KCMI research fellow Park Chang-gyun said. "It is hard to rule out the possibility of the government influencing the subcommittee."
So far, the NPS has refrained from exercising its shareholder rights, limiting its opposition vote to certain issues such as excessive wages for executives.
After proclaiming a stewardship code last year, however, the NPS said it will be more "influential" in exercising its rights as a shareholder. As of last year, the fund has a more than 5 percent stake in 297 companies, including big names such as Samsung Electronics, SK hynix and POSCO.
