Gov’t, ruling party agree to empower pension

By Chung Min-uck

Government officials and senior lawmakers of the ruling Grand National Party (GNP) have neared an agreement to establish a new committee to exercise the shareholder rights of the National Pension Fund (NPS), GNP officials said Sunday.

“We concur with (the government’s policy of) strengthening the usage of the NPS’ shareholder rights under the condition of non-governmental intervention,” a senior GNP lawmaker was quoted as saying by Yonhap News Agency.

“The main purpose is to give benefits to the public,” the official said.

The NPS is the world’s fourth largest pension fund with assets amounting to 324 trillion won ($308 billion) as of last year. It currently has more than 5 percent of shares in 139 listed companies in Korea including Samsung Electronics and Hyundai Motor Group. Yet, it has been passive in being involved in management decisions of the companies.

The Presidential Council for Future and Vision has been seeking to change the current National Pension Fund Management Committee, the control tower of the NPS, to a panel of exercising shareholder rights, for more active use of NPS stakes to rein in Korean conglomerates.

Under the current scheme, the NPS Management Committee supervised by the health minister is allowed to make yes or no decisions on investment schemes that the NPS is involved in.

If a new measure is adopted, the upcoming committee is to raise its voice in corporate boardrooms by dispatching non-executive directors and exercising their voting rights at shareholder meetings.

Insiders expect the NPS will be able to flex its muscles but critics are concerned about the negative effect.

“The NPS can’t be operated independently from the government since it appoints key posts of the pension fund,” said Rep. Yoo Seung-min, a member of the GNP’s decision-making Supreme Council.

“It isn’t right to discuss the exercise of shareholder rights (of the NPS) in the light of checking on chaebol. The reform plan should be focused on how to make more profit,” Yoo said.

The issue of the NPS exercising its shareholder rights arose during a public conference on April when Kwak Seung-jun, chairman of the Presidential Council for Future and Vision, made a speech on wielding greater shareholder power over Korea’s conglomerates through the usage of the shares of world’s No. 4 pension fund.

Kwak, a close aide of President Lee Myung-bak, questioned Korean conglomerates’ management transparency and the will to innovate, insisting on the pension fund’s utilization of its power would be the most effective way to keep large companies in check.

The provocative words from Kwak immediately raised criticism from chaebol, the name given to Korea’s big conglomerates, referring to his idea as socialistic.

Kwak’s remarks are in line with President Lee’s policy of sharing the conglomerates’ growth with small- and medium-sized companies.

Last month, the NPS opened its first overseas branch in New York to expand its investment abroad and diversify its portfolio as it tries to make good use of its growing assets.