NPS gets tough on sketchy directors

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NPS gets tough on sketchy directors

The National Pension Service (NPS), the country’s largest investor, made changes to its voting guidelines so it can reject the appointment of corrupt directors to boards of companies it invests in.

On Sunday, the JoongAng Ilbo secured a document with a revised guideline of how the NPS should exercise its voting rights as a shareholder this year.

According to the document, the NPS has decided to oppose conglomerate owners or businessmen being appointed or reappointed as directors of companies if they will diminish shareholder value because they have been engaged in embezzlement or breach of trust. People facing court trials are included.

The guideline stipulates that anyone opposed by the NPS should be opposed for three years.

And the NPS will announce its position on the director nominees to the public before exercising its vote at shareholders’ meetings.

“There have been people pointing out that the voting standard is too comprehensive and vague, so we made it clearer,” said an official from the NPS. “The revised guidelines will be applied starting with this year’s shareholder meetings.”

The revision comes at a time when a number of conglomerate family members have been tried for embezzlement and breach of trust.

They include SK Group Chairman Chey Tae-won and his younger brother Chey Jae-won, vice chairman of the group; CJ Group Chairman Lee Jay-hyun; Hyosung Group Chairman Cho Suck-rai and his eldest son, Cho Hyun-joon, president of the group; Tongyang Group Chairman Hyun Jae-hyun; LIG Group Chairman Koo Cha-won; and his first son, Koo Bon-sang, vice chairman of LIG Nex1.

Meanwhile, the NPS also plans to vote against the reappointment of directors who have served more than 10 years on the boards of companies.

Directors that fail to attend more than 75 percent of board meetings will also be opposed for reappointment by the NPS.

The position of the NPS will be made public before they attend the shareholders’ meeting. Previously, guidelines had stipulated that it only needed to make its position known “if necessary.”

Many big groups are holding shareholders’ meetings next month.

“This would eventually mean that the government, using people’s retirement funds, will interfere in private business management,” grumbled one conglomerate official.

As of November, the NPS had 423 trillion won ($393.7 billion) worth of reserved funds. Of that amount, 84 trillion won is currently invested in local stocks. It holds more than 7 percent of the shares of Samsung Electronics, which is more than the amount owned by Chairman Lee Kun-hee (3.3 percent).

It owns 7.5 percent of Posco’s shares, 8.98 percent of Naver’s and 9.15 percent of SK Hynix’s.

“If the NPS’s position is revealed before voting, it could affect the decisions of other institutional and retail investors,” said an official from the Federation of Korean Industries.

According to Kwak Kwan-hoon, a law professor at Sunmoon University, “The NPS should not forget the fact that it is the people who are paying into the fund for their life after retirement.”

BY KIM HYUN-YE [angie@joongang.co.kr]



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