Protecting pensions

The National Pension Service is responsible for Korean people’s old age. As of April, it manages the 635 trillion won ($568 billion) that 22 million eligible people have dutifully paid to ensure they are covered for senior life in a country where private policy planning is not commonplace. The chief investment officer (CIO) must be capable, morally upright and neutral with such a huge onus of safeguarding the coffers for nearly half of the population on his shoulders.

The CIO position has been vacant for nearly a year since the new administration took off. The latest recruitment process is mired in speculation and suspicions of interference from the Blue House. One of the finalists, Kwak Tae-seon, the former CEO of Baring Asset Management Korea, confessed that in late January he got a call from Jang Ha-sung, the president’s policy chief who also overseas appointments at major public posts, advising him of the opening before the job was advertised.

The Blue House previously said Jang talked to Kwak over the phone after he was shortlisted among finalists for the job by the NPS. But after Kwak’s comment, it corrected itself and admitted that Jang recommended the position to Kwak as he believed he would make a good choice.

A Blue House official advising a person to apply for a public position is outright illicit interference in appointments.

The Blue House said Kwak did not make the job at the end as he was deemed “unqualified to spearhead reforms in the national pension” ahead of the fund’s adoption of the stewardship code. The NPS renewed its search for a CIO after announcing it could not find a suitable person in the initial round.

The NPS adopts the stewardship code from this month to exercise a more aggressive role as a large shareholder in management affairs in the listed companies it has a stake in.

The pension will go beyond merely throwing votes on management decisions put up for shareholders’ approval, and will voice its stance on mergers and acquisitions and other management moves after studying whether they truly help shareholders.

At the same time, the NPS could be influenced by the government to tame companies — or chaebol — in its campaign to reform the family-run corporate ownership structure. The NPS owns 5 percent or more of 256 publicly traded companies.

The Blue House’s explanation implies that the original favorite finalist’s thoughts on pension investments did not comply with the NPS’s new role. The past CIOs stepped down in disgrace because they were connected to the former administration.

The future lives of the Korean population are at risk if the NPS shakes. Kwak said he was told by NPS CEO Kim Sung-joo early that June that the fund cannot hire him due to an order from someone at the Blue House.

The Blue House must explain exactly who struck down the final choice at the last minute. The pension is the people’s money, not the government’s.

JoongAng Sunday, July 7, Page 34