No legislation of voting rights

The debate on empowering the National Pension Service, the country’s largest equity investor, with more assertiveness in corporate governance is poised to resurface. Ruling Saenuri Party Representative Kim Jae-won and a group of legislators submitted a bill to revise the national pension law enhancing the state fund’s fiduciary duty as stockholder. The issue came under the spotlight after Kwak Seung-jun, chairman of the Presidential Council for Future and Vision, raised it in April last year. The debate was watered down by critics raising concerns over state interference in corporate governance.

But it may now come under serious legislative scrutiny considering Kim is a key aide of Park Geun-hye. The main opposition Democratic United Party has also been supporting the idea of enhancing voting rights of the pension fund. Among the top issues on the upcoming presidential campaign platform are economic equality and chaebol reform. Politicians believe oversight by the state fund will help accelerate reform in listed companies affiliated with chaebol groups.

But the bill should not be exploited as a campaign strategy as the law has significant implications in view of the fund’s significant stakes in major companies.

The fund manages savings the public pay every month in anticipation of their retirement and senior days. Its purpose should not be to reform chaebol or corporate governance. The first article of the related law stipulates that the National Pension Service should be committed to help stabilize public lives and welfare. If it invests with the purpose of reforming large companies, the fund’s profitability and security could be at risk.

What is also worrisome is the problem of state interference. The government is the de facto owner of the shares. The pension fund owns the world’s fourth-largest equity assets with stakes in most major companies. If the state fund invests in order to exercise influence over a certain company, the private sector can be nationalized. Governance in chaebol leaves a lot to be desired. Abuse of power and lax oversight by the board needs to be monitored. But they should be approached through other systems and legal processes rather than the pension fund. If the pension fund’s voting rights still need to be strengthened, the ownership of the fund should first be revamped to quell any possibility of state interference.