NPS to Delegate Voting Rights to Fund Managers in Pilot Program

Timing of Full Implementation Undecided; Decision to Be Made After Pilot Phase
Concerns Raised Over Potential Weakening of Shareholder Oversight
Criteria for Initiating Shareholder Representative Lawsuits Clarified

Jung Eun-kyeong, Minister of Health and Welfare, is speaking about the National Pension Fund returns at the 2nd National Pension Fund Management Committee meeting for 2026 held at the Annex of the Government Seoul Office in Jongno-gu, Seoul on March 5, 2026. Photo by Jo Yongjun

The National Pension Service (NPS) is set to pilot a plan to delegate the voting rights it previously exercised directly to private fund managers (GPs). A task force (TF) will be established in the first half of the year to develop the plan and hold discussions, after which a decision will be made on whether to expand the implementation.

The National Pension Fund Management Committee held its 2nd meeting of the year at the Government Complex Seoul on March 5 and discussed this proposal.

Currently, for companies in which the Fund Management Headquarters has made direct investments, it also exercises voting rights for shares managed by external managers. Only for companies in which the NPS has not invested directly does it delegate voting rights to external fund managers. Last year, among 599 companies where the NPS could exercise voting rights, it participated directly in 342, while fund managers represented the remaining 257.

The plan now is to allow external fund managers to exercise voting rights directly for the shares they hold. The delegation model will shift from a discretionary investment model to a single fund model, under which the fund manager will exercise voting rights in its own name for the shares it manages. Initially, this pilot will be conducted with some of the eight asset managers currently engaged in responsible investment mandates, and following evaluation, the direction for further implementation will be considered.

It was initially expected that this plan would be presented as an agenda item for voting, but in consideration of opposition from various stakeholders, it appears to have been changed to a reporting item. The delegation of NPS voting rights has faced criticism, as domestic asset managers, who are often under the influence of large domestic conglomerates, may undermine the NPS's role in shareholder oversight if they are given the authority to vote. Furthermore, concerns have been raised that dividing shares among multiple asset managers could make effective checks and balances more difficult.

Improvements to the guidelines for shareholder derivative lawsuits were also included as a reporting item. A shareholder derivative lawsuit is a system that allows shareholders to file a lawsuit on behalf of a company if the company fails to take legal action against directors or others who have caused damage to the company.

The NPS has specified that eligible targets for derivative lawsuits will be companies engaged in 'dialogue with companies.' In particular, the NPS will initiate such lawsuits mainly against companies involved in non-public dialogues. Non-public dialogue refers to cases where the Fund Management Headquarters sends confidential letters to companies selected by the Stewardship Responsibility Committee as needing improvement in key areas such as ▲dividends ▲executive compensation ▲violations of laws ▲industrial safety, and requests improvement measures.

As a rule, the Fund Management Headquarters is designated as the decision-making body for filing derivative lawsuits. By exception, if at least one-third of the members of the Stewardship Responsibility Expert Committee request it, or if the Fund Management Headquarters is unable to make a decision, the committee will decide.

Meanwhile, at the same meeting, the committee also deliberated and approved the NPS's financial statements for the previous year. Last year's investment return was 18.82%, surpassing the previous year's 15.00% and marking a new all-time high. Including investment gains of approximately 231.6 trillion won, the NPS accumulated a total of 245.1 trillion won last year, bringing the total reserves to 1,458 trillion won.

Minister of Health and Welfare Jung Eun-kyeong stated, "Achieving a return of over 10% for three consecutive years has strengthened the financial stability of the National Pension Service, which is the precious retirement fund for the people," adding, "We will continue to strive for stable returns through prompt responses to market conditions and risk management."

She also noted, "With the introduction this year of stewardship code compliance checks on asset management companies by financial authorities, the foundation for responsible stewardship activities will be further strengthened," and added, "This will promote qualitative growth in the capital markets and increase returns on the fund, which serves as the nation's retirement savings."

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