Economic Groups: "National Pension Service Must Secure Independence Before Strengthening Shareholder Rights"

Hankyungyeon, Kyeongchong, and Sangjanghyeop Jointly Hold Seminar

01. On the 6th, the Korea Economic Research Institute (KERI), together with the Federation of Korean Industries, the Korea Association of Mid-sized Companies, the Korea Listed Companies Association, and the KOSDAQ Association, held a seminar titled "Improving Governance to Ensure the Independence of the National Pension Service" at the Federation of Korean Industries Conference Center. (From the third person on the left in the photo) Choi Jun-seon, Honorary Professor at Sungkyunkwan University; Kwon Tae-shin, President of KERI; Choi Kwang, former Minister of Health and Welfare; Yoon Chang-hyun, Professor at the University of Seoul; Kwak Kwan-hoon, Professor at Sun Moon University.

[Asia Economy Reporter Dongwoo Lee] Major economic organizations have argued that securing independence should come first before strengthening the National Pension Service's (NPS) shareholder rights. This comes amid concerns that, as the NPS's influence in corporate management grows significantly, companies may face interference in their management rights.

On the 6th, key domestic economic organizations including the Korea Economic Research Institute under the Federation of Korean Industries, the Korea Employers Federation (KEF), the Korea Federation of Medium-sized Enterprises, the Korea Listed Companies Association, and the KOSDAQ Association held a joint seminar titled "Governance Improvement for Securing the Independence of the National Pension Service" at the FKI Conference Center.

Kwon Tae-shin, President of the Korea Economic Research Institute, expressed in his opening remarks, "Our companies are now facing management interference not only from overseas hedge funds but also from the National Pension Service," adding, "The problem is that our companies have to endure such attacks without any effective defense measures." He explained, "Since the purpose of establishing the NPS is to guarantee the future income of the people, we cannot help but express serious concerns about the government using the fund for other purposes."

Former Minister of Health and Welfare Choi Kwang pointed out deviations by the NPS in his keynote speech. He criticized, "Illegal acts by some companies should be punished through relevant laws, but the government's idea of using the NPS to sanction companies does not align at all with the fund's establishment purpose."

Former Minister Choi proposed establishing a "National Pension Committee (tentative name)" under the Ministry of Health and Welfare, chaired by the Minister of Health and Welfare, to perform only supervisory functions in order to enhance the independence and expertise of the NPS fund management. He also suggested forming a fund management committee under the National Pension Committee, composed solely of the world's top fund management experts to improve expertise and secure independence.

Choi Jun-seon, Honorary Professor at Sungkyunkwan University School of Law, pointed out the legal basis for the committees under the NPS. He noted that the 'Stewardship Responsibility Expert Committee' and the 'Investment Policy Expert Committee,' which execute the stewardship code, are based on enforcement ordinances rather than higher laws.

On the 6th, the Korea Economic Research Institute (KERI), together with the Federation of Korean Industries, the Korea Association of Mid-sized Companies, the Korea Listed Companies Association, and the KOSDAQ Association, held a seminar titled "Improving Governance to Ensure the Independence of the National Pension Service" at the Federation of Korean Industries Conference Center. The photo shows Kwon Tae-shin, President of KERI, delivering the opening remarks. Photo by Kwon Tae-shin

He also identified the inclusion of farmers, fishermen, self-employed individuals, consumers, and civic groups in the regional subscriber organizations as problematic. He argued that diversity in committee composition does not necessarily guarantee independence. In particular, he pointed out the phenomenon where the NPS faces judicial scrutiny every time the administration changes. Civic groups also emphasized the need to refrain from excessive corporate management intervention through the committees.

Professor Kwak Kwan-hoon of Sunmoon University’s Department of Law and Police Science expressed concerns about governance issues within the NPS. He pointed out that because committee members lack professional knowledge in fund investment, management, or corporate governance, the NPS’s decision-making could ultimately be swayed by political judgments. Professor Kwak stressed that investment decisions and voting rights of the NPS fund should be entrusted to investment experts, and the current Stewardship Responsibility Expert Committee should only oversee and supervise these experts' decisions.

Lee Sang-chul, senior member of KEF and user representative on the Fund Management Committee, advocated for restructuring the current stakeholder-centered fund management committee?which includes government, labor, and civic groups?into an expert-centered committee. He explained that the highest decision-making bodies of global pension funds such as Japan’s GPIF, Norway’s GPFG, the Netherlands’ ABP, and Canada’s CPP are all composed of private investment and financial experts selected through public recruitment or labor-management recommendations, thus free from political influence. This allows them to focus on maximizing returns, and by securing public trust through expert decision-making, social conflicts like those in Korea are rarely found despite potential conflicts of interest among stakeholders.

Choi Sung-hyun, Head of Policy at the Korea Listed Companies Association, emphasized, "As the National Pension Service, one of the world's top three pension funds, expands its domestic stock investments with formidable financial power, if the independence of fund management is not secured, corporate management could be shaken for political reasons." He added, "Recent amendments to the Enforcement Decree of the Capital Market Act and the 'Guidelines on the Fiduciary Responsibility Activities of the National Pension Fund' established at the end of last year are amplifying these concerns."

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