|Hyeon Tak Shin|
Recently, South Korea's National Pension Fund Operation Committee amended the Guidelines for Voting of the Fund to deliberate on the independency of outside directors, signaling the start of an attempt by the National Pension Service (NPS) to strengthen its shareholder's rights which were previously almost neglected.
Ever since last year when the chairman of the Presidential Council for Future & Vision asserted that the NPS should hold chaebol in check through exercising its shareholder's right for social responsibility, there was a sea change in attitudes. The chairman of the NPS affirmed the so-called principles of ESG (environment, social, governance) which prevents the NPS from investing in companies that are inattentive to the environment, socially irresponsible, or unsound in governance structure.
Due to the immense number of shares held by the NPS in the Korean stock market, such change may establish a new order in the market; the NPS invests in 591 out of 1,819 public companies. It holds more than a 5% share in 190 public companies including Samsung Electronics and Hyundai Motor Company, and more than a 9% share in 50 public companies. The NPS is the largest shareholder of the most financial holding companies in Korea.
It is crucial to recognise the standard followed by NPS for actively exercising its shareholder's rights. The interest of the insured, although important, does not provide enough incentive in reality because citizens are required to join the national pension plan by the National Pension Act. On the other hand, the NPS, an organisation affiliated with the Ministry of Health & Welfare, is likely to behave according to government policy, and corporate social responsibility may be considered per se by the NPS in addition to the nominal principles of profitability, stability and public interest.
Despite the uncertainty rising from the possible fluctuation of principles according to the change in government policies, government-sponsored CSR is expected to make up for existing capitalism.
Hyeon Tak Shin
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