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State pension fund to exercise voting rights on lawbreaking firms

National 17:00 November 25, 2019

SEOUL, Nov. 25 (Yonhap) -- South Korea's state-run pension fund will only exercise its voting rights on companies that it invests in when they seriously hurt its bottom line with unfair business practices and law violations, the health ministry said Monday.

According to the ministry, the National Pension Service (NPS) will more actively hold the management of badly run companies accountable in cases involving embezzlement and breach of trust.

The state pension fund will also demand the dismissal of corporate directors who are suspected of being involved in illegal activities.

The measures came amid growing calls that the NPS should actively step in to manage invested companies whose governance and management styles are blamed for causing a drop in their corporate value and shareholders' value.

The country adopted the so-called stewardship code in July 2018 that obliges institutional investors to actively engage in corporate governance to enhance the interests of their clients. Such actions, some business leaders argued, can hurt their control over companies and make them vulnerable to hostile takeovers.

Seoul's pension service has well over 600 trillion won (US$510 billion) worth of assets under its management, becoming one of the three biggest pension operators in the world.

South Korea adopted the state pension program in 1988 to guarantee income for the elderly after retirement and to provide coverage for disabilities and surviving family members.

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