NPS’s panel doesn’t object to Samsung’s merger

An external panel that exercises voting rights for the National Pension Service (NPS) when requested did not object to the public pension fund’s earlier decision to vote yes for the merger of Samsung C&T and Cheil Industries.

The NPS, the largest shareholder of Samsung C&T, decided to back the merger during a Samsung C&T shareholder’s meeting on July 17 without consulting the external group, the Council of Experts on the Exercise of Voting Rights, according to multiple local media outlets.

The nine-member external panel called a meeting on Tuesday, inviting both the panel’s members and officials from the NPS and the Ministry of Health and Welfare. Since it is extremely rare for the outside panel to convene a meeting without a request from the NPS, some speculated that the meeting was intended to express the panel’s opposition to the fund’s decision on the merger.

But Kim Sung-min, the chief of the panel, denied the speculation, implying that the panel’s stance is in line with that of the NPS. “Because the NPS didn’t delegate the voting rights to the council, we didn’t review or decide on the merger,” Kim said as he came out of the meeting room at The K-Hotel Seoul in Yangjae-dong, southern Seoul. He went on to say that the primary focus of the discussion was placed on procedural issues.

“The council conducted a thorough discussion of the procedures through which the Investment Fund Office [of the NPS] made the decision and delivered what we discussed [during the meeting],” he said. “We will reveal it after the shareholder meeting.”

The pension fund neither denied nor confirmed the reports about the panel’s meeting. The high stakes deal among Samsung affiliates has put a spotlight on the influence the NPS has on companies and the Korean economy as the country’s largest investor.

The deal pits the country’s largest business group against a U.S. hedge fund, Elliott Associates, and has reignited debate about how public institutions should behave as shareholders.

Some analysts said that the fund should add the national interest to its voting guidelines.

“The voting guidelines should include the aspect of protection of the local capital market to safeguard local companies from foreign hedge funds” said Chun Sam-hyun, a law professor at Soongsil University, on Tuesday at a forum held by the right-wing interest group Center for Free Enterprise.

As for the voting guideline, the NPS noted on its website, “We exercise voting rights on stocks we hold in a manner intended to maximize the long-term value of our investments.”

It continued: “In order to make prudent votes, we are committed to scrutinizing companies’ performance as well as advocating their effort to enhance long term corporate financial performance.”

Others called for other measures that companies could use to protect themselves from outside investors that are considered predatory.

Yun Kang-heum, a law professor of Yonsei University, suggested that local companies be allowed to embrace the “poison pill” strategy, which can block hostile takeovers.

In response to the big shareholder’s move, an alliance of minority shareholders of Samsung C&T expressed opposition to the merger proposal, saying that the merger damages the interests of small shareholders.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]