Economy Sector: "Unifying the National Pension Fund Shareholder Derivative Lawsuit Committee is Illegal"

[Asia Economy Reporter Yoo Hyun-seok] The business community is raising voices of opposition, calling the National Pension Service's decision to centralize the authority for shareholder derivative lawsuits to the Stewardship Responsibility Committee (SRC) an "illegal guideline."

On the 20th, eight economic organizations including the Korea Employers Federation, Korea Chamber of Commerce and Industry, Korea International Trade Association, Federation of Korean Industries, Korea Federation of Medium-sized Enterprises, Korea Federation of Small and Medium Business, Korea Listed Companies Association, and KOSDAQ Association held a joint policy forum under the theme "Is the National Pension Service's Stewardship Responsibility Activity Guideline Okay as It Is?" They demanded the establishment of legal grounds for stewardship responsibility activities including derivative lawsuits and a complete revision of the current illegal guidelines.

Regarding the National Pension Service's push for derivative lawsuits, the Ministry of Health and Welfare held Fund Management Committee meetings on December 24 last year and February 25 this year. They discussed revising the "Stewardship Responsibility Activity Guideline" to unify the decision-making authority for derivative lawsuits under the SRC. However, no conclusion was reached, and further discussions are ongoing in a subcommittee of the Fund Management Committee.

Lee Dong-geun, full-time vice chairman of the Korea Employers Federation, said in his opening remarks, "The reason for entrusting the decision-making authority to a non-permanent body with a three-year term, where members recommended by labor and civic groups hold the majority, before even attempting to pursue derivative lawsuits is obvious." He pointed out, "It means that even if damages occur to companies and their shareholders due to the filing of derivative lawsuits, and even if the fund suffers losses from long-term litigation defeats, neither the government nor the National Pension Service will take any responsibility."

He emphasized, "Derivative lawsuits by the National Pension Service are fundamentally different from other shareholder rights exercises. Legal grounds must be established, and from the perspective of 'alignment of authority and responsibility,' the Fund Management Headquarters of the National Pension Service should decide on derivative lawsuits."

Attorney Cho Hyun-duk, who provided legal advice commissioned by the business community, said, "When the state or public organizations acquire stocks as trust property of the people and intervene in the management rights of domestic companies, it directly results in the state intervening and controlling private company management," adding, "This may violate the intent of Article 126 of the Constitution."

Attorney Cho explained that the claim that derivative lawsuits enhance the corporate value of target companies has not been empirically verified, nor has a consensus been established in academia. Furthermore, it is unclear whether the benefits from increased corporate value specifically accrue as profits to the National Pension Service, so thorough verification should precede this.

During the subsequent designated discussion, various alternative policies were proposed. Jung Woo-yong, policy vice chairman of the Korea Listed Companies Association, suggested, "Since it is difficult to hold SRC members directly accountable, there is a risk that derivative lawsuits and shareholder proposals could be politically abused. Only 1% of agenda items opposed by the National Pension Service have actually been rejected at shareholders' meetings, and stewardship responsibility activities that do not gain the consent of other shareholders need to be improved through evaluations by external experts regarding their direction and content."

Professor Jeon Sam-hyun of Soongsil University’s Department of Law stated, "Derivative lawsuits carry a high risk because if lost, the National Pension Service must compensate not only the defendant's litigation costs but also damages suffered by the company. At minimum, a provision allowing the National Pension Service to seek recourse from SRC members for damages paid in the event of losing derivative lawsuits should be introduced into the National Pension Service Act to prevent the political misuse of the National Pension Service."

Meanwhile, based on the legal advisory results reviewing the illegality of the stewardship responsibility activity guidelines, the business community plans to monitor future discussions on guideline revisions and proceed with demands for a complete overhaul of the guidelines and legal responses including public interest audit requests.

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