Flexibility Needed
The National Pension Service (NPS) of Korea recorded a total asset of no less than 561 trillion won at the end of January this year, when 18.9% of the amount was in the South Korean stock market. The organization is planning to increase its shareholdings in the local stock market by approximately 10 trillion won this year. As of the end of 2015, the NPS was investing in 290 South Korean companies. At present, the NPS has shares in almost all KOSPI-listed companies.
As a result, the NPS is raising its voice in those companies. It exercised its voting rights 529 times at regular shareholders’ meetings and the like in March alone and 44% of the voting rights it exercised during the period were to raise objections.
This can be problematic if the NPS lacks flexibility in doing so. The increasing presence of the NPS may lead to contraction of investment and make it difficult for them to exercise their management rights. Last month, the organization raised a lot of objections with regard to the appointment of inside directors, outside directors, auditors, etc.
“The NPS should become more flexible in making decisions because the fund managed by the NPS increases by approximately 50 trillion won each year and, as such, its shareholdings cannot but increase with time,” an entrepreneur pointed out, continuing, “Under the circumstances, the NPS needs to reconsider how to make an investment and how to exercise its voting rights in order to make better use of the people’s money.”
Market experts are also advising that the NPS should become more independent by taking this opportunity. “Its autonomy can be guaranteed when it is allowed to make an investment based on principles and in pursuit of profitability,” the Korea Economic Research Institute remarked, adding, “This will be helpful for companies in the end although some of them may have a hard time due to the lack of its assistance in the short term.”