Research center tells NPS to better protect its investments

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Research center tells NPS to better protect its investments

The National Pension Service should take a more assertive stance with the companies it invests in, according to new research from Korea University.

The research recommended that the pension fund take the lead in class action and damages lawsuits if the companies it invested in seriously harm the interests of stakeholders, the NPS said on Tuesday.

The Ministry of Health and Welfare, which oversees the country’s largest institutional investor, asked a research center at Korea University to find new ways for the NPS to exercise its shareholder rights after its controversial vote for the merger between Samsung C&T and Cheil Industries.

An official at the Health Ministry said that the fund rarely turned to lawsuits to guarantee stakeholder rights.

“There were only a few cases in which the National Pension Service filed damage suits,” said Lim Hyun-gyu of the ministry’s national fund financing division. “No cases of NPS class-action lawsuits against domestic companies exist.”

In addition to more active legal engagement, the university’s research also suggested the fund outline specific requirements for a proper corporate governance structure. If many of the NPS’s invested companies fail to follow certain conditions, it should designate them for monitoring.

The research center also advised the NPS to adopt a stewardship code consisting of seven principles.

The code, which the NPS plans to adopt in July, requires institutional investors to disclose how they will engage with and monitor the companies they invest in and the reasons behind their voting activities.

First adopted in the United Kingdom in 2010, stewardship codes, which are not legally binding, list guidelines meant to encourage institutional investors to execute their voting rights in a more responsible manner.

The Korea University team also advised the pension fund to focus on avoiding conflicts of interest and the effects of political turbulence.

The former Park Geun-hye government is accused of pressing the pension service to vote in favor of the merger of Cheil Industries and Samsung C&T after the president received bribes from Samsung. The pension service was a major stakeholder, with a 5.57 percent investment in Samsung C&T. Instead of fully adopting the suggestions, the fund and ministry said they will use them as a point of reference.

“We will consult the recommendations when the fund discusses ways to improve independence,” said a public relations official at the NPS.

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