On the Second Day Meeting with the Ruling Party, the Economic Sector Says "National Pension Also Gets Tied Hands and Feet"

Among the Top 100 Companies by National Pension Fund,
31 Hold More Than 10% Stake

Park Yong-man, Chairman of the Korea Chamber of Commerce and Industry, and Yoo Dong-soo, Senior Deputy Chairman of the Policy Committee of the Democratic Party of Korea, are entering the conference room to attend the "KCCI-Democratic Party Fair Economy TF Policy Meeting" held on the 14th at the Korea Chamber of Commerce and Industry in Jung-gu, Seoul. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Dongwoo Lee] As the government and the ruling party accelerate the passage of the three corporate regulation laws, including the amendment to the Commercial Act and the Fair Trade Act and the enactment of the Financial Group Supervision Act, the business community has launched an all-out effort for the second day to block the passage of the bills.

According to the business community on the 15th, the Korea Chamber of Commerce and Industry, the Korea Employers Federation, and the think tanks of the four major groups (Samsung Economic Research Institute, Hyundai Motor Group Global Management Research Institute, SK Management & Economic Research Institute, LG Economic Research Institute) will continue to call for a full review of the three law amendments at the "Policy Meeting on the Three Fair Economy Laws for the Party and Business Community," hosted by the Democratic Research Institute in the afternoon.

At this meeting, the Korea Chamber of Commerce and Industry plans to point out that even the National Pension Service will be subject to the 3% rule if the amendment to the Commercial Act is implemented. They argue that if the amendment is implemented as originally proposed, the election of audit committee members will be separated from other directors, and the voting rights of major shareholders will be limited to 3%, which could tie the hands of the National Pension Service, a key player in improving corporate governance.

Earlier, in 2018, the National Pension Service introduced the Stewardship Code (principles regarding fiduciary responsibility) and established active management participation measures for companies that damage corporate value and shareholder rights through illegal acts such as embezzlement and breach of trust.

According to data from the National Pension Service, as of July this year, the National Pension Service holds shares in 1,014 companies in Korea (with an evaluated value of 139 trillion won), of which it holds more than 10% stakes in 99 companies. Additionally, the National Pension Service is a shareholder in all of Korea's top 100 companies by market capitalization, holding more than 10% stakes in 31 of them. The system introduced to strengthen the National Pension Service's shareholder rights may ironically be hindered by the amendment to the Commercial Act just two years after its implementation.

Lee Kyung-sang, Head of the Economic Research Headquarters at the Korea Chamber of Commerce and Industry, said, "The government's 3% rule in the Commercial Act amendment could infringe on the role of institutional investors in improving corporate governance through the National Pension Service's introduction of the Stewardship Code," adding, "It is necessary to improve through institutional investors' monitoring roles and corporate self-regulation, as in advanced countries, rather than through laws."

The Korea Employers Federation also plans to specifically explain the difficulties companies will face if the government's amendment to the Commercial Act is implemented at the discussion forum on the same day. They emphasize the case of hedge fund Elliott, which previously hindered Hyundai Motor Company, explaining that such cases could occur frequently if the amendment is enforced.

Ha Sang-woo, Head of the Economic Research Headquarters at the Korea Employers Federation, said, "Elliott once recommended the CEO of Ballard Power Systems, a Canadian company whose major shareholder is a Chinese competitor of Hyundai Motor, as an inside director on the audit committee," adding, "At that time, Hyundai Motor had many friendly shares, so fortunately it was rejected, but if the separation of audit committee elections and the 3% rule are implemented, the outcome is uncertain."

Ha also explained, "At the discussion forum, we will actively appeal that while it is natural for companies to face appropriate sanctions if they make mistakes, we are very concerned about the expansion of preemptive uncertainty and the increase in litigation risks," adding, "We will strongly urge that companies be allowed to compete sufficiently with overseas companies in global competition."

This content was produced with the assistance of AI translation services.