An abuse of power

The National Pension Service (NPS) vowed to proactively exercise its voting rights with a 12.45 percent stake in Korean Air, the national flag carrier whose name has been disgraced by the abuse of power by the owner family members. The fund management committee, which is the top decision-making body of the NPS, published a letter expressing concerns about the excesses of the owner family and demanded that KAL meet with the management committee.

It is a very aggressive move by the pension service, which is the second-largest shareholder in the flag carrier. Although the pension service commands dominant positions in most blue chip and mainstay companies, its involvement has not gone beyond voting and demanding increases in cash dividends.

Minister of Health and Welfare Park Neung-hoo, who chairs the fund management committee, called on Korean Air — and Samsung Securities, which caused a market uproar with its fat-finger dividend error — to allow the NPS to use its rights as a major shareholder to “protect national assets and the profitability of the fund.”

The Cho clan of Hanjin Group, which owns Korean Air, is under investigation for abusing employees and subcontractors, embezzlement, smuggling and capital flight. If all the charges are found to be true, the family members must be punished by law. The business has been damaged by poor publicity.
However, the health minister and the fund management, who should direct the operation of pension assets with a broad vision, should not be involved in the operation of any one company. Such a move would look too populist and emotional.

Moreover, an institutional player’s dominant position must not be used to tame companies. If a company’s problem is feared to cause losses for the fund, the fund’s voting rights committee or investment committee could deal with the issue.

President Moon Jae-in pledged a so-called stewardship code for the NPS during his campaign. But it could be abused to tame chaebols. The NPS came under fire for its personal service to former President Park Geun-hye. But its independence still remains questionable.

The NPS holds 5 percent or more of 276 local companies. Hyundai Motor Group withdrew its reorganization plan because it did not have NPS backing. If the NPS does not maintain sovereignty, it can hardly avoid criticism for being a tool for socialist-like control.

JoongAng Ilbo, June 1, Page 30