Park Neung-hoo: "Investment Company Guidelines Will Increase Predictability of National Pension Service Shareholder Rights Exercise"

The 10th National Pension Fund Management Committee
Discussion on the 'Guide for the Composition and Operation of the Boards of Directors of Companies Invested by the National Pension Fund'

[Asia Economy Reporter Minji Lee] "Through the guidebook on investee companies, it will be possible to increase the predictability of the National Pension Service's exercise of shareholder rights on agenda items of shareholder meetings of companies invested in by the National Pension Service, and help companies autonomously operate and develop corporate governance."

Minister of Health and Welfare Park Neung-hoo is speaking at the 10th National Pension Fund Management Committee held at the Plaza Hotel in Jung-gu, Seoul on the 16th. / Photo by Moon Ho-nam munonam@

On the 16th, Park Neung-hoo, Minister of Health and Welfare and Chairman of the National Pension Fund Management Committee, said this at the 10th meeting of the National Pension Fund Management Committee held at the Plaza Hotel in Jung-gu, Seoul. On this day, the National Pension Service reported the 'Guidebook on the Composition and Operation of the Board of Directors of Companies Invested by the National Pension Fund,' which includes contents such as the board of directors disclosing a specific CEO succession policy and changing audit committee members to outside directors, at the Fund Management Committee (Fund Committee).

On this day, Chairman Park explained, "After the 8th Fund Committee report, we broadly listened to the opinions of the business community and revised the 'Guidebook on the Composition and Operation of the Board of Directors of Companies Invested by the National Pension Fund.'"

The guidebook for investee companies was introduced by the National Pension Service to enhance shareholder interests. It is an extension of the Stewardship Code (Principle of Trustee Responsibility), the fundamental principle of shareholder activities introduced in July 2018, and the active shareholder rights exercise guidelines, including director dismissal and appointment, passed by the Fund Committee at the end of last year. While the previously introduced Stewardship Code and others outlined the big picture of the National Pension Service's shareholder activities, this guideline serves as a detailed instruction containing specific actions.

The guidebook is expected to include contents such as △ the board of directors preparing and disclosing a specific CEO succession policy △ composing the audit committee and compensation committee entirely of outside directors △ not using capital structure changes or mergers and acquisitions as a means for management or the board to protect themselves against hostile takeovers.

On this day, the Fund Committee will also deliberate on the target excess return to be achieved compared to next year's market return. Chairman Park said, "The target excess return determines the direction of fund management and is used as a performance bonus standard for the Fund Management Headquarters, so deliberation considering market conditions is necessary."

In addition, an interim report on the strategic asset allocation system, which accounts for more than 90% of fund management performance, will be made. Chairman Park explained, "We plan to form an 'Asset Allocation Improvement TF' with researchers from the National Pension Service and prepare improvement plans through expert consultations, reflecting opinions that asset allocation considering the long-term target return of fund management and the fund growth phase is necessary."

Furthermore, the Fund Committee plans to deliberate on amendments reflecting the dividend tax reduction effect in the overseas stock benchmark index and changes to the fund management plan to cover the budget shortfall for performance bonuses of the Fund Management Headquarters.

Chairman Park said, "Recently, domestic and international economic indicators have improved, and the investment environment is showing signs of recovery thanks to expectations for the early commercialization of COVID-19 vaccines. Although we expect to achieve a fund return of around 7% this year, since uncertainties in the financial market are still high, we will not let our guard down and will maintain continuous monitoring and agile responses."

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