"Active Engagement": National Pension Service Blocks Excessive Board Remuneration and Director Overlaps

Voting Directions Finalized for 13 Listed Companies
Support for Article Amendments Reflecting Commercial Act Revisions
Checks on Governance Proposals Such as Director Remuneration and Appointments

The National Pension Service (NPS) has finalized its voting directions for 13 major listed companies ahead of the regular general shareholders' meetings in March. While the NPS generally maintained a supportive stance for most agenda items, it made a clear opposition to several key proposals that could affect corporate governance and shareholder rights, drawing significant attention from the market regarding its standards and direction.

On March 19, the NPS Stewardship Responsibility Committee held its fifth meeting and deliberated on and finalized its voting directions for the shareholder meeting agendas of 13 companies, including Hyosung Advanced Materials, LG Electronics, POSCO Future M, Naver, Woori Financial Group, POSCO Holdings, Korea Zinc, Hana Financial Group, KB Financial Group, KT&G, Shinhan Financial Group, HiteJinro, and Hansol Chemical.

The NPS largely supported routine agenda items such as approval of financial statements and amendments to the articles of incorporation that reflect the intent of the Commercial Act revision, including the introduction of electronic general meetings or provisions regarding independent directors. However, it selectively opposed certain changes to the articles of incorporation and proposals related to treasury stocks, as well as director compensation and appointments, which could impact corporate governance.

Opposition to Excessive Director Compensation, Appointments, and Articles Amendments Seeking Governance Benefits

National Pension Service Fund Management Headquarters Overview

The agenda items opposed by the NPS in this voting exercise were concentrated in specific areas.

First, regarding director compensation, the NPS opposed proposals at Naver, KB Financial Group, HiteJinro, and Hyosung Advanced Materials, judging that the proposed compensation limits were excessive relative to management performance.

There was also opposition to certain director appointments. At Hyosung Advanced Materials, the NPS opposed candidates with a history of excessive concurrent roles or infringement of shareholder rights, and at Shinhan Financial Group, it opposed the appointment of specific director candidates for similar reasons. In the case of Korea Zinc, the NPS either opposed or abstained from voting on some candidates.

Amendments to the articles of incorporation were another major target of opposition. At Hyosung Advanced Materials and HiteJinro, the NPS opposed proposals to reduce the number of directors, citing concerns that such changes could undermine the effectiveness of cumulative voting. Amendments to shorten director terms were also included among the items opposed.

Proposals related to treasury stock were also an important criterion. At Hansol Chemical, the NPS opposed plans for holding or disposing of treasury shares and changes to stock option grant methods, stating that these were inconsistent with the objective of enhancing shareholder value.

The Korea Zinc agenda item attracted the most attention, exhibiting a more complex voting approach than simple approval or rejection. The NPS supported the proposal to determine the number of directors under the cumulative voting system but split its votes on shareholder-proposed candidates.

At the same time, the NPS opposed or abstained from voting on certain director and audit committee member candidates, adopting different strategies depending on the issue. This approach is interpreted as an attempt to maintain checks and balances rather than leaning toward specific interests.

Changes in Line with Commercial Act Revisions..."Shareholder Value and Fund Profitability as Behavioral Standards"

Seoul National Pension Service Seoul Northern Regional Office Comprehensive Consultation Room. Yonhap News Agency

Overall, this round of voting by the NPS can be summarized as “support with selective opposition.” For a considerable number of companies, including LG Electronics, POSCO Future M, Woori Financial Group, POSCO Holdings, Hana Financial Group, and KT&G, the NPS approved all agenda items. However, for certain proposals that could affect corporate governance or shareholder rights, the NPS exercised restraint through opposition or abstention.

These standards are also aligned with the direction of the Commercial Act revisions being pursued by the government. The NPS has made it clear that it will, in principle, oppose agenda items that contravene the intent of the Commercial Act revisions from this year, signaling an expanded influence over corporate governance in general.

The NPS is focusing on key checkpoints such as the weakening of the cumulative voting system, impairment of board oversight functions, and lack of transparency in the use of treasury stock. In particular, it plans to scrutinize acts such as companies disposing of treasury shares to defend management control instead of retiring them, regarding these as infringements on shareholder rights. The NPS is also expanding pre-meeting engagement with corporate IR departments and enhancing advance checks, indicating ongoing changes in its approach to voting.

The Stewardship Responsibility Committee stated, "We will actively exercise our voting rights to enhance shareholder value and improve fund profitability," adding that it will, as a rule, oppose agenda items that run counter to the intent of the Commercial Act revisions.

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