Where 600 Trillion Won Go?
As suspicions have risen that the National Pension Service (NPS) approved a merger between two Samsung affiliates, Samsung C&T and Cheil Industries, with external pressure, bills which are designed to prevent any reoccurrences of this incident, are being competitively proposed. Taking a look at the bills, however, they are rather to look out for own interest or serve as a stopgap than an overhaul of the current fund operation system, which is vulnerable to the pressure from the government and president. Accordingly, there are concerns that the NPS, which manage 600 trillion won (US$514 billion) of retirement assets, can be adversely affected.
According to the National Assembly on January 23, four partially revised bills of the National Pensions Act were proposed after prosecutors and special prosecutors began an investigation in the NPS in November last year. Although the details are different, they mainly deal with the appointment procedure of chairman and director of fund services, operation and management responsibility of funds and operation of expert committee. As the government hinted the reorganization of fund operation systems after watching the results of special prosecutor inspection, these bills are attracting more attention.
However, critics say that the four bills include unrealistic clauses and cannot eliminate the root cause of the recent scandal. In particular, the bills only scratch the surface of the role and status of the voting rights expert committee, which is a hot potato. The bill proposed by Kim Seung-hee, a lawmaker from the ruling Saenuri Party, raises the status of the voting rights expert committee, which is more like an advisory body, to the shareholder right committee, which is a legal organization, and requires a prior approval when exercising the voting rights. An official, who is well acquainted with the NPS, said, “It is more important to clarify what agenda the voting right expert committee will handle. Strengthening the status seems to be an easy solution but it is highly likely just to add unnecessary management involvement.
Some insist that the organization needs an overhaul by not only forcing to take responsibility but also giving empowerment. They say that the fund office under the NPS needs to raise its status to a “fund company” and set up a CEO position to let the current head of the fund office control the overall fund operation. Also, the fund needs vice president, who collects opinions from expert committees and make decision, and they lead Chief Information Officer (CIO) in each investment sectors. Jun Kwang-woo, former Chairman and CEO of the NPS who also served as Chairman of Financial Services Commission (FSC), said, “Unless the governance of the NPS is fundamentally reformed to secure the expertise and independence of fund operation, all the discussions are highly likely to end in an empty talk. The current National Pension Fund Management Committee, which is consisted of non-experts, should be comprised of experts like the Monetary Policy Committee of the Bank of Korea, and each representative of the NPS should recommend them. Then, the specialty of the fund will improve, while it will be free of the external pressure.”