National Pension Fund to directly exercise voting right for Hanjin KAL shares

The National Pension Fund has decided to directly exercise the voting right for the Hanjin KAL stock it is holding through its the trust management firm, rather than delegating the right to the firm. As such, attention is focusing on which party the National Pension Fund will choose to support between Hanjin Group Chairman Cho Won-tae and his sister and former Korean Air Vice President Cho Hyun-ah, who are in management dispute, at Hanjin KAL’s regular shareholders' meeting on March 27.

“We have decided to redeem and directly exercise the voting right for our stockholdings in Hanjin KAL and other firms, which we previously planned to delegate to our trust management firms,” the National Pension Fund's Experts Committee on Trustee Responsibility announced at its fifth meeting on Friday. The new decision is apparently based on the fact that the pension's purpose of stockholding in Hanjin KAL is currently suggested as participation in management in regulatory filings. As a major shareholder, the National Pension Fund is set to actively exercise its voting right, rather than entrusting it to a trust management firm.

The National Pension Fund had originally managed its holdings in Hanjin KAL shares by entrusting them in entirety to a trust management firm, before entrusting last November with the voting right for its entire shareholdings in the conglomerate in line with a decision by its fund management committee. Going forward, the fund will decide on the direction of its voting right exercise by undergoing the necessary process including its fund management headquarters’ analysis of agendas for Hanjin KAL’s general shareholders' meeting.

Amid intense dispute over management control of the conglomerate, it is highly likely that the National Pension Fund will effectively serve as a casting vote.

Based on the shareholders' list, which was closed at the end of last year, shareholdings friendly with Chairman Cho are said to include 33.45 percent, including those possessed by Delta Air Lines (10.0 percent) and Kakao (1.0 percent). On the other hand, the “Tripartite Alliance,” which consists of former Vice President Cho, private equity fund KCGI, and Bando Engineering, has secured a 31.98 percent stake in the company. The difference in stakes held by the two sides was only 1.47 percentage points. Against this backdrop, who will be the winner could be dependent on the direction of the voting right (2.9 percent) that NPS will choose to exercise.

The National Pension Fund has left open and will review all possibilities, including abstention, with regard to the exercise of its voting right. “We will focus on increasing the interest of the National Pension Fund and increasing shareholders’ value, and comprehensively consider the rationality of the causes that the two parties pursue,” an NPS official said.

Some observers say that the dispute between the two sides over management control will continue even after the upcoming shareholder meeting. As the two sides continued to buy stakes in the company this year, Chairman Cho has increased his friendly shares to 37.42 percent, while the tripartite alliance raised its shares to 37.48%.


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