NPS to launch committee for portfolio firms' governance improvement

Some in the business circle argue that it will worsen firms' management efficiency and eventually reduce NPS' profitability

A Seoul-based branch of National Pension Service
A Seoul-based branch of National Pension Service
Byeong-Hwa Ryu and Jun-Ho Cha 2
Mar 29, 2023 (Gmt+09:00) hwahwa@hankyung.com
Pension funds

South Korea’s National Pension Service (NPS), one of the world’s largest pension funds, is slated to establish a committee to improve the governance structures of its portfolio companies. Targeting local firms that don’t have controlling shareholders, such as KT Corp., POSCO Holdings Inc. and KT&G Corp., the plan is creating concerns about excessive government intervention in business. 

The state-run pension fund announced on Wednesday it will set up a new committee under the fund management arm. The institutional investor, managing 890.5 trillion won ($683.4 billion) in assets as of end-2022, will determine the plan after considering public opinions and winning approval from its boardroom and the health minister.

The committee, to be comprised of 10 members from the private sector with a one-year term, will be launched as early as in the first half of this year, The Korea Economic Daily understood.

NPS stated that the new committee will suggest ways for better governance structure models and improve standards of exercising the pension fund’s voting rights. It will also monitor the pension fund’s fulfillment of stewardship responsibilities.

The committee will also examine whether better corporate governance leads to an increase in share prices. Its suggestions to improve governance frameworks will be used as reference data by the pension fund’s stewardship responsibility division, which was set up in January 2019. 

LISTED FIRMS TO DEMAND REVISION OF PLAN

Meanwhile, some members of the local business circle are voicing concerns that the committee may lead to excessive intervention by the government in the private sector. The committee members will be approved by the state-run pension fund’s Chairman Kim Tae-hyun, who was appointed by President Yoon Suk Yeol and started his term last September.  

Many local firms have negative views on the creation of the new committee.

They are voicing worries that the committee’s proposals on governance structures will lower companies’ management efficiency and eventually decrease NPS’ profitability. The firms also argue that the new organization’s roles will overlap with those of the existing division for stewardship responsibilities.

Korea Listed Companies Association (KLCA), a group of public firms, is slated to file its suggested revisions to the pension fund’s plan by March 31.

Write to Byeong-Hwa Ryu and Jun-Ho Cha at hwahwa@hankyung.com

Jihyun Kim edited this article.
#National Pension Service Korea #Korea NPS #corporate governance in Korea #shareholder activism in Korea #exercising voting rights #business governance structure #excessive government intervention #Korean listed companies

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