NPS breaks from 'rubber-stamp' role in shareholders' meetings

The entrance of a branch office of state-run retirement pension operator National Pension Service (NPS) is seen in Seoul's Jongno District, Jan. 23, 2023. Yonhap

The National Pension Service (NPS) is increasingly flexing its voting power at general shareholders' meetings of major conglomerates and financial groups, breaking from its long-standing reputation as a passive "rubber-stamp" investor.

The shift, which appears to be prompting unease among company management, aligns with the government's push for the state-run pension fund to better represent minority shareholders and fulfill its role as an institutional investor, observers said.

At Shinhan Financial Group’s shareholders’ meeting Thursday, the NPS, which holds about 9 percent of the firm’s shares, voted against the reappointment of Chairman Jin Ok-dong as an inside director. The fund cited his track record of “actions that undermined corporate value or infringed on shareholder rights.”

In 2021, Jin received a “cautionary warning” from the Financial Supervisory Service while serving as CEO of Shinhan Bank for failing to adequately oversee the sale of fund products linked to a 1.7 trillion won ($1.1 billion) hedge fund fraud scandal involving Lime Asset Management.

At Hanjin KAL's shareholders' meeting the same day, the NPS also opposed the reappointment of Hanjin Group Chairman Cho Won-tae as an internal director, citing failures in oversight that it said "harmed corporate value and shareholder rights."

Both Jin and Cho secured reappointments despite opposition from the pension operator.

Shinhan Financial Group Chairman Jin Ok-dong speaks during a shareholders' meeting at the group's headquarters in Jung District, Seoul, Thursday. Courtesy of Shinhan Financial Group

The pension fund has also challenged agenda items beyond executive appointments in other meetings.

Ahead of KB Financial Group’s shareholders’ meeting, the NPS voiced opposition to a proposal to raise the cap on directors’ remuneration from 3 billion won to 3.5 billion won, saying the increase was excessive relative to performance and came despite inadequate internal controls. At the meeting Thursday, the cap was ultimately maintained at 3 billion won for the 2026 fiscal year.

Market watchers say the pension operator's increasingly assertive stance — breaking away from its past practice of rarely voting against motions at shareholders' meetings — could become a key variable in corporate governance, particularly in the financial sector.

"As the NPS exercises its voting rights more actively, corporate governance and compensation structures at financial groups are likely to become more transparent," said Seo Ji-yong, a professor of business administration at Sangmyung University.

"At the same time, however, the growing scrutiny on the management's decision-making could increase uncertainty surrounding the companies' long-term strategies," he added.

The shift broadly aligns with the policy direction of the Lee Jae Myung administration, which has emphasized stronger protection of minority shareholders and a more active role for institutional investors through revisions to the Commercial Act. The proposed changes are aimed at strengthening minority shareholder rights and curbing the influence of controlling shareholders.

During the NPS' policy briefing last December, Lee criticized what he described as entrenched "inner circles" within the financial industry, saying a small group of insiders continued to dominate corporate control, and urged the pension fund to more actively exercise its shareholder rights.

As major financial groups hold their annual shareholders' meetings this week, a notable shift is underway as they adjust board structures and management's responsibilities ahead of amendments to the Commercial Act set to take effect in July.

Shinhan Financial Group and KB Financial Group revised their charters to state that directors shall faithfully perform their duties for "the company and its shareholders," expanding the duty beyond the company alone.

Meanwhile, BNK Financial Group shareholders approved the reappointment of Chairman Bin Dae-in on Thursday.

Woori Financial Group and Hana Financial Group already held their meetings earlier this week, while NH Nonghyup Financial Group shareholders are set to meet Monday.