Institutional Investors Accelerating Moves toward Participation in Stewardship Code

Prior to the introduction of the Stewardship Code by the National Pension, Institutional investors are accelerating their moves toward participation in the Stewardship Code. Institutional investors have been picking up speed since the inauguration of the Moon Jae-in administration that emphasized shareholder friendly policies. 

According to the Korea Corporate Governance Service on November 19, four companies participated in the Steward Code. The four were Meritz Asset Management, Hi Asset Management, Dalton Investments LLC and Zebra Investment Management. Considering that there were only nine companies that introduced stewardship codes from last year to October of this year, the number of participants is on a sharp rise. In addition, the Shinhan Financial Group announced that it will introduce the Stewardship Code from its asset management company within this year and will expand its participation across the board. The Shinhan Financial Group’s participation will mark the second time for a Korean financial group to take part in the Stewardship Code after the KB Financial Group’s participation in September. 

The National Pension’s participation is promoting others’ participation in the Stewardship Code. The Ministry of Health and Welfare is in the position to decide whether or not to let the National Pension participate in the Stewardship Code when a study to review the introduction of the Stewardship Code is completed on December 20.

If the National Pension, a major player in the investment industry, moves, other corporate investors that have studied the pleasure of their companies will be able to participate in exercising voting rights more easily. "In Japan, where participation in the Stewardship Code is active, the introduction of the code was at a snail’s pace in its early stage. But as the Japanese public pension system GPIF introduced the code, the Japanese asset management industry followed the GPIF ahead of others,” Kim Joon-seop, a researcher at KB Securities.   

However, it is unclear whether shareholders’ execution of voting rights will be strengthened. An asset management official pointed out that not independent financial companies but financial companies that belong to large business groups were reluctant to exercise their voting rights over their business groups’ affiliated companies. "Institutional investors free from companies and ownership relations are not very large in size so can hardly have an impact on companies," added Lee Syo-yeon, a research fellow at the Korea Institute for Finance.