"Representative Lawsuit on National Pension, Losses for Citizens, Companies, and Pension Funds Alike"

FKCCI Holds Roundtable on 'National Pension Fund Derivative Lawsuit'

[Asia Economy Reporter Jin-ho Kim] Concerns have been raised primarily within the industrial sector that the National Pension Service's (NPS) initiation of derivative lawsuits will become a "no-win game" causing harm not only to the public and companies but also to pension funds. For the stable management of the fund, "independence and expertise" must be guaranteed, and it is pointed out that it is unreasonable for the government-influenced NPS to initiate derivative lawsuits.

At a roundtable titled "Is the National Pension Service's Derivative Lawsuit Desirable for the People?" hosted by the Federation of Korean Industries (FKI) on the afternoon of the 7th, all participants expressed concerns, calling it a "dangerous idea." The meeting was chaired by Kwon Tae-shin, Vice Chairman of the FKI, and attended by Professor Choi Kwang of Hankuk University of Foreign Studies and President Heo Hee-young of Korea Aerospace University.

Professor Choi previously served as the 14th Chairman of the National Pension Service and the 34th Minister of Health and Welfare. President Heo was the user-side representative of the Trustee Responsibility Committee under the Pension Fund Management Committee until last month.

During the discussion, President Heo pointed out that the NPS's derivative lawsuits would harm pension funds, companies, and the public alike. He said, "If the NPS loses the lawsuit, only the public, who are the owners of the fund, will suffer due to long-term litigation costs," and added, "Even if it wins, the lawsuit itself damages the company's image and causes stock prices to fall, resulting in losses for both companies and pension funds."

He particularly expressed concern about the negative impact on companies. President Heo stated, "Lawsuits could be possible regarding management activities from 10 years ago, increasing uncertainty in corporate management, which will ultimately lead to reduced investment and more passive and conservative management." He continued, "In our corporate environment, where there are no means to defend management rights, the NPS's derivative lawsuits will make it easier for hedge funds to launch management rights attacks."

Professor Choi also pointed out governance issues within the NPS. He criticized, "Under the Fund Management Committee chaired by the Minister, two committees?the Investment Policy Committee and the Trustee Responsibility Committee?were established, which did not exist before," and added, "Since the Ministry of Health and Welfare oversees the appointment of three full-time experts to each committee, a system where the Ministry acts as a player has been perfectly established."

He further noted, "Certain civic groups and labor unions also directly participate in the committees or exert significant influence over their appointments."

Vice Chairman Kwon also expressed concerns in his opening remarks, stating, "The government has steadily removed institutional obstacles that hindered the NPS from monitoring and regulating companies," and added, "The initiation of derivative lawsuits is the final stage of this corporate governance process." He warned, "If lawsuits are actually filed based on the Trustee Responsibility Committee's decisions, the NPS will become an omnipotent organization controlling most of Korea's listed companies."

Meanwhile, the NPS recently sent letters related to shareholder derivative lawsuits to about 20 domestic companies and is expected to file lawsuits against 2 to 3 companies by the end of the year. The government-influenced NPS is initiating derivative lawsuits and delegating the litigation authority to the Trustee Responsibility Committee (hereafter referred to as the Trustee Committee), which is only a subordinate committee.

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