National Pension Fund to Exercise “Full-fledged Shareholders’ Voting Rights”

The National Pension Fund is likely to cause controversy by announcing its intent to exercise shareholders’ voting rights aggressively in companies in which it has stakes. With its total fund reaching 133 trillion won, the national fund manager has invested 7.6 percent of the total fund, or 10 trillion won, in 351 companies as of late 2004.

The National Pension Corporation unveiled on February 24, saying, “We have finalized out asset management guidance that includes criteria and procedures of exercising voting rights according to the National Pension Act revised last year.”

Because the National Pension Fund plans to exercise its voting rights in full-scale according to the above-mentioned guideline as well as to increase its stock investment, the national pension manager is likely to have some impact on corporate management.

First of all, the pension manager has decided to call aggressively for materials on meeting agenda before corporate general shareholders’ meetings. Also, it plans to clarify its position on an agenda-by-agenda basis, taking the magnitude of each agendum into consideration.

In addition, it will actively respond to every corporate management and board of directors. The fund announced that it will basically give approval to the appointment of directors but could veto the appointment of outside directors with attendance below 60 percent. Moreover, it expressed that it might oppose unjustifiable managerial protection while supporting the incumbent management in principle in responding to a management battle.

Nonetheless, opposition is far more likely to grow significantly with strengthened exercise of voting rights following the latest guideline.

In response, the business community reacted sensitively by saying that the government or civic groups may influence corporate management through the National Pension Fund. Not only that, businesses expressed concerns over the fund’s exercise of voting rights over management replacement while expanding its investment in domestic conglomerates.

Sang-Hoon Kim corekim@donga.com sanjuck@donga.com