Politicizing pension service

NPS should not go beyond the stated mission

The National Pension Service’s recent move to strengthen its shareholder rights is set to backfire. The plan will surely invite the government’s intervention to tame recalcitrant private companies. Politicizing the NPS is a risky scheme.

NPS Chairman Jun Kwang-woo reportedly said he will team up with institutional investors to launch a committee to oversee listed enterprises. He said the panel will be an official channel for talks with CEOs to discuss ways of raising the value of shares and improving corporate governance. The NPS will recommend outside executives to listed companies. It will also blacklist troublesome companies.

It appears natural for leading investors, including the NPS, to police listed companies. Its well-intentioned motives will not work as Jun has envisioned.

The agency wants to become another financial regulator. It might be open to instruction from those in power. Currently, listed companies have difficulty in hiring qualified professionals as outside executives. Their plight is related to tacit pressures from regulators and those in power for installing cronies.

The NPS is an agency which should remain outside politics. Whoever takes power—whether conservatives or liberals, it should become a sanctuary free from political meddling. Its intrinsic mission is to maximize the funds for retirees. It is dangerous for the agency to institutionalize a mechanism for political intervention.

As many as 18 million people, 40 percent of the population, are subscribers since the country introduced the national pension system in 1988. It manages $250 billion. This year, three million retirees are beneficiaries of the service.

Jun reportedly cited KB Financial Group as a case in point for its rationale to interfere in the management of private companies. Even without the NPS intervention, the nation’s largest financial group became an object for international mockery. The government kicked out the market-oriented CEO and named Euh Yoon-dae, one of the cronies of President Lee Myung-bak. The regulators arbitrarily mobilized all administrative tools, including the inspection of driving records of the CEO, to force him into declaring his resignation.

In such government intervention, will the NPS side with the government to appoint a figure favored by the ruling camp, or challenge it for meddling in the management affairs of a private bank?

The NPS chief says it will target ownerless private financial companies, and privatized former public enterprises, not chaebol which have a clear-cut ownership structure.

Jun also says the NPS is interested in long-term growth of the companies in which it invested, not in their dividends. It plans to protect local companies from foreign hostile takeover bids.

The service should limit itself only to managing the fund. It should refrain from asking companies to pursue long-term growth at the sacrifice of short-term dividends or vice versa. It risks jeopardizing its own foreign investments by declaring it will obstruct foreign hostile M&A bids at home.

It should bear in mind that its primary goal is to maximize the return of the fund, not volunteering to work as a servant for those in power.