Transfer of National Pension Class Action Authority to Review Committee Falls Through (Comprehensive)

[Asia Economy Sejong=Reporter Kim Hyewon, Seoul=Choi Daeyeol, Lee Hyeyoung] The Ministry of Health and Welfare's plan to transfer the authority for representative lawsuits of the National Pension Service from the Fund Management Headquarters to the Stewardship Responsibility Committee (SRC) has effectively fallen through. This is due to strong opposition from the business community and growing resistance within related government departments.

According to related ministries on the 9th, the government has reached a consensus to withdraw the proposed revision of the "Stewardship Responsibility Activity Guidelines," which would have delegated the authority for representative lawsuits of the National Pension Service to the SRC, ahead of the full meeting of the National Pension Fund Management Committee scheduled for the 25th. A key government official stated, "There is strong opposition that authority should not be granted without responsibility," adding, "The decision on this matter will be deferred during this administration." This upcoming Fund Management Committee meeting is expected to include, unusually, vice ministers from other ministries besides the Ministry of Health and Welfare, the main ministry in charge, who will explain their departments' positions and bring closure to the controversy. ▶Related article page 5

The Ministry of Health and Welfare attempted to transfer decision-making authority regarding the National Pension Service's representative lawsuits, scheduled to begin this year, to the SRC, which is merely an advisory body, but faced opposition both internally and externally. The business community has argued that the representative lawsuit itself is an unprecedented excessive infringement on corporate management rights worldwide and has expressed concerns about the SRC's potential for excessive litigation due to lack of expertise and unclear accountability. They pointed out that if the SRC decides to file a lawsuit, there would be no internal checks within the National Pension Service, nor any institutional mechanism to hold the SRC accountable for damages caused to companies in case of a loss.

The business community's stance that "authority and responsibility must align" is reportedly partially accepted by the Blue House as well. It was also pointed out in interdepartmental discussions that the SRC is politically biased, being composed predominantly of members recommended by labor and civic groups. A government official said, "There were voices expressing concern that stimulating anti-business sentiment just before the presidential election would be a burden," adding, "We cannot rule out the possibility of re-pursuing the guideline revision after the presidential election."

Representative Lawsuit Guideline Revision Cancelled... Business Community "Cannot Be Assured After Presidential Election"

Although the government’s proposed revision of the National Pension Service representative lawsuit guidelines has effectively been withdrawn, the business community remains cautious. There is always a possibility that the government could push it again depending on its will. The controversial guidelines were promoted amid insufficient communication between the main ministry and stakeholders around the time the revision was proposed in December last year, raising concerns in the business community that similar situations could recur.

Yoo Jeongju, head of the Corporate System Team at the Federation of Korean Industries, said, "Even if the current government steps back, concerns about the National Pension Service representative lawsuit will continue with the next administration," adding, "Unless the National Pension Service’s organization and governance, which are inevitably influenced by government pressure, are reformed, this problem could keep recurring." Son Seokho, head of the Social Policy Team at the Korea Employers Federation, noted, "There is a consensus even among ex officio government members that this issue requires a more cautious approach."

The business community has long argued that the proposed guideline revision wrongly delegates authority and should be stopped. They contend that it is unjustifiable for the SRC, rather than the Fund Management Headquarters, to have exclusive decision-making power over the National Pension Service’s representative lawsuits. Since virtually all management activities could be subject to lawsuits, transferring this authority to the SRC could cause significant disruptions to corporate management, according to companies.

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Concerns Over Harm to Pension Beneficiaries if Lawsuits Are Excessive

Currently, the National Pension Service holds more than 5% stakes in a total of 261 domestic KOSPI and KOSDAQ listed companies. Among these, the National Pension Service is the largest shareholder in 9 companies and the second-largest shareholder in 208 companies. There are also 48 companies where it holds more than 10% of shares.

Companies oppose the plan also because excessive litigation could harm not only pension funds and companies but also ordinary citizens who are pension subscribers. Seven employer organizations, including the Korea Employers Federation, issued a statement last month calling for the suspension of the guideline revision and for clear legal provisions regarding the procedures and entities responsible for the National Pension Service representative lawsuits.

In the statement, the organizations said, "Despite companies bearing 42% of the total pension insurance contributions, the Ministry of Health and Welfare and the National Pension Service did not even hold prior consultations with the business community," adding, "Forcibly pushing the revision is merely a nominal shareholder value claim that amounts to substantial management interference and distorts the Stewardship Code."

As of October last year, the National Pension Service’s fund size was KRW 917.8 trillion, with domestic stock investments accounting for 17.9%, or KRW 163.9 trillion. The National Pension Service’s share in the domestic stock market reaches 6.7%. Yoo emphasized, "If authority is transferred to the SRC, companies will suffer losses, and the National Pension Service, whose purpose is to secure citizens’ retirement, will ultimately suffer as well," adding, "Even if this is reconsidered, it should be approached cautiously after reforming and restructuring the National Pension Service."

A representative from a major corporation said, "Since the revision contains many unreasonable aspects, the ongoing exhausting controversy itself is a burden," expressing concern, "Although the transfer of representative lawsuit authority has been canceled, there is a possibility it will be pursued again, so we cannot be fully assured."

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