NPS Reducing Active Exercise of Voting Rights

The National Pension Service (NPS) added 37 companies last year to its list of closed dialogue companies. In addition, the NPS increased the number of its corporate dialogues such as letter exchange and face-to-face talks from 149 to 225 in 2020. The number of companies under its close monitoring due to the possibility of law violation increased from four to 25 last year.

The NPS exercises its shareholder rights by selecting closed dialogue companies, dividing them into those under open monitoring and closed monitoring, and then initiating active shareholder activities such as shareholder proposal. The NPS introduced new guidelines related to the activities in December 2019 so that stewardship activities can be conducted for one year and the process can be shortened when a company refuses to have a dialogue.

However, the current number of companies under open monitoring is zero and the number of those under closed monitoring stood at two (Hyundai Green Food and Namyang Dairy Products) last year. This monitoring constitutes a higher exercise of the shareholder rights of the NPS. The extremely small numbers may be because the stewardship code was effective through talks in the preceding stage. However, the previous case of Namyang implies that the exercise of its shareholder rights may be insufficient.

At present, the NPS is expanding its stewardship code exercise by, for example, refining its active shareholder right exercise guidelines. However, some hurdles still remain and the examples include the registration of open monitoring targets, which takes up to three years.