NPS opposes board member appointments at Shinhan, Hyosung, LG Chem

National Pension Service (NPS) headquarters in Jeonju, North Jeolla Province / Courtesy of NPS

By Anna J. Park

As the National Pension Service (NPS) has decided to exercise its voting rights to show its dissent over local companies' board member appointments at their upcoming shareholders meetings, questions are rising over whether the active participation of the country's pension operator puts too much pressure on corporations.

The pension operator's trustee committee met earlier this week to discuss how to exercise their votes at the shareholders meetings of seven companies ― Shinhan Financial Group, POSCO, SK D&D, Hyosung, LG Chem, Hanjin KAL Corp. and Hanwha Systems.

First off, the NPS decided to object to Shinhan Financial's reappointment of five of its current outside directors for another term on the board, on the grounds of their failure to properly supervise the financial giant and prevent it from mis-selling problematic funds, as seen in the 2020 Lime fiasco.

While investment industry watchers view that it's too much to hold outside directors accountable for such mis-selling scandals, it is generally expected that their reappointment would be approved at Shinhan's shareholders meeting later this month.

The NPS is the largest shareholder of Shinhan Financial With an 8.78 percent stake in the group. Yet the reappointment of the outside directors is likely to be approved, as the combined portion in the hands of private equity firms, including IMM PE, Affinity Equity and Baring PEA which tend to have a more favorable stance on the financial group, exceeds that of the pension operator.

The NPS' trustee committee also decided to cast an opposing vote on Hyosung's appointment of its Chairman Cho Hyun-joon to serve as its executive director on the grounds that Cho's criminal record of embezzlement and malfeasance charges would harm the corporate value.

The trustee committee also plans to object to the reappointment of LG Chem's Vice Chairman Shin Hak-cheol as its executive director, considering Shin's approval vote for the spinoff of LG Energy Solution in 2020. The NPS thinks Shin's approval vote impaired both LG Chem's corporate and shareholder value.

The number of dissenting votes cast by the NPS peaked at 625 in 2019, and it is expected to break that record this year.

Yet, the pension operator's dissenting votes are not likely to have a tangible effect on any of the companies. Only 1.8 percent of the NPS' 549 dissenting votes last year were actualized.

NPS' trustee committee plan to evaluate appointments at Hana Financial Group, KB Financial Group and Woori Financial Group next week.