Profit, not politicsIn a recent ad hoc meeting of KB Kookmin Financial Group shareholders, the state-run National Pension Service (NPS), which holds sizeable stakes in major Korean financial and non-financial companies, threw in its vote of approval for a motion put up by the union to be given the right to name an outside director to participate in management decisions. The motion was voted down due to opposition from foreign shareholders.
But the ramifications are not small. The NPS declared that it would be more assertive in exercising its rights as a major shareholder in listed companies. Institutionalizing a union-recommended board member and giving the NPS greater voting rights were both campaign promises of President Moon Jae-in.
The NPS move suggests it acts more to please those with political power than to maximize its benefits as a shareholder. NPS Chairman Kim Sung-joo had been a lawmaker of the ruling Democratic Party and a member on the State Planning and Advisory Committee that served as the transition team for Moon.
The NPS, in managing people’s post-retirement funds, must strictly seek profit. Yet the fund has frequently been used for political purposes. Ryu Si-min, health minister under former President Roh Moo-hyun, and Kwak Seung-joon, former President Lee Myung-bak’s adviser for state future planning, caused controversy by arguing for the exercise of voting rights by the NPS, as the move could increase state meddling in private enterprises. In its controversial act of bypassing an internal review committee to back the merger of Samsung C&T and Cheil Industries in 2015, the NPS also skipped the normal procedure to reach a vote, as it did with KB Financial Group’s union-proposed motion.
The NPS must not use its shareholding position at random. It must learn from its Japanese counterpart, the Government Pension Investment Fund (GPIF), which entirely outsources investment in domestic funds and entrusts voting rights to the fund managers, so it can avoid unnecessary controversy about political influence and make a better management decisions through market players. The new government must not use the pension fund for political purposes.
JoongAng Ilbo, Nov. 22, Page 34