Financial Authorities Announce Comprehensive Revision of 'Asset Management Companies' Voting Rights Exercise Guidelines'

On the 26th, the Financial Supervisory Service and the Korea Financial Investment Association jointly announced a revised guideline for asset management companies' exercise of voting rights.

On this day, the Financial Supervisory Service and the Korea Financial Investment Association disclosed the revised guideline for asset management companies' exercise of voting rights as the final result of the practical task force (TF) for revising the guideline.

This revision includes measures to enhance the practical usefulness of the guideline from the user's perspective to provide substantial assistance in exercising voting rights by asset management companies. Before the specific guidelines for each issue, a new 'General Principles' section was established to present model standards for internal control related to voting rights exercise and disclosure policies, decision-making systems, and procedures.

The organization was also restructured to be practice-oriented. The existing guideline was organized by agenda topics such as governance, capital structure, and social responsibility regardless of the order of agenda submission, which was inefficient for analyzing many agendas in a short time. The revision reorganized the structure to be practice-centered according to the order of agenda items listed in the shareholder meeting notice form prescribed by corporate disclosure formats to improve the efficiency of agenda analysis tasks.

The distinction between laws and recommendations, as well as principles and examples, was clarified. Items presenting judgment criteria different from those stipulated by law include the relevant laws to provide a basis for judgment. For principle-based judgment criteria based on abstract concepts such as shareholder value, possible judgment factors or examples were added. To reflect environmental changes, voting guidelines from major domestic and international proxy advisory firms and the latest cases including ESG (Environmental, Social, and Governance) were added. In particular, regarding governance (G), many examples were strengthened to enhance shareholder rights and improve the responsibility and transparency of the board of directors.

An official from the Financial Supervisory Service stated, "The Financial Supervisory Service, together with the Korea Financial Investment Association and the stock exchanges, will steadily promote the establishment of a disclosure information database, and will continuously review and supplement related systems so that asset management companies actively exercising voting rights can be evaluated as 'faithful fiduciaries.'"

Earlier, the Financial Supervisory Service, the Korea Financial Investment Association, asset management companies, and the Korea Capital Market Institute formed a related TF in April and began the revision work. The existing guideline had not reflected the latest situations since its revision in June 2016, and some provisions only presented abstract and ambiguous principles, making it insufficient for asset management companies to refer to when actually exercising voting rights.

Through inspections of the actual status of voting rights exercise and disclosure by asset management companies and listening to industry opinions, it was judged that there were practical difficulties in closely analyzing many agendas in a short period due to the concentration of domestic shareholder meetings and limited human resources. The actual utilization by asset management companies was also low due to the lack of specific judgment criteria or examples. The TF first announced in August plans to standardize the voting rights exercise disclosure form and to promote the establishment of a disclosure information database (DB).

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