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S. Korea finalizes guidelines on pension fund's shareholder activism

All News 11:29 December 27, 2019

SEOUL, Dec. 27 (Yonhap) -- South Korea on Friday approved proposed guidelines for shareholder activism by the country's largest state pension fund, paving the way for the fund to press companies it holds stakes in to dismiss board members over breach of trust and other illegal activities.

The management committee -- the highest decision-making body of the National Pension Service -- made the decision at a meeting in Seoul.

The move came as the world's third-largest pension fund has been seeking to exercise its stewardship and shareholder rights in companies that it has a stake in.

The NPS, the country's top institutional investor and holder of stakes in many listed firms, has been actively pushing for a more aggressive shareholder role for companies it invests in, prodding them to adopt better governance structures and do business in a way that does not hurt shareholder value.

Under the guidelines, the pension fund would be able to actively exercise its stewardship and shareholder rights against companies that have been found to have committed serious crimes, like embezzlement or breach of trust.

The NPS also can demand the dismissal of corporate directors who are suspected of involvement in illegal activities and call for changes to a company's articles of association, if needed.

The country's business community voiced concerns that the NPS could unduly interfere in business operations.

Seoul's pension service had over 700 trillion won (US$600 billion) worth of assets under its management as of August, making it one of the three biggest pension operators in the world. It aims to increase the total to over 1,000 trillion won by 2024.

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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