[News in focus] NPS takes on Korean Air, Samsung Securities

The National Pension Service (NPS) and other investors have the beleaguered companies Korean Air and Samsung Securities in their sights.

Minister of Health and Welfare Park Neung-hoo, who presides over the fund management committee at the NPS, publicly took a swipe at the two companies on Friday, pledging that the NPS will actively exercise its rights as a major shareholder in them.

“The latest abuse of power by the Korean Air owner family and [Samsung Securities’] fat-finger dividend error affected corporate values and hurt the profitability of the National Pension Service,” said Park during an NPS fund management committee meeting.

The NPS is the second-largest investor in both companies, with a 12.68 percent stake in Korean Air and 12.52 percent in Samsung’s brokerage unit as of the first quarter, according to the pension fund.

Park’s comments were unusual, as the pension operator seldom criticizes specific companies for mistakes that cause stock prices to decline.

The NPS also rarely votes against the plans of the companies it is invested in, approving them nearly 90 of the time.

The two companies’ separate high-profile scandals brought down their stock prices, and the NPS is acting tougher this time around.

The shifting stance goes hand in hand with the Moon Jae-in administration’s policy of containing the power of chaebol families through actively exercising public sector shareholders’ rights.

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

“[With the adoption of the stewardship code,] the NPS will ask corporate management to come up with solutions for certain problems and order them to prevent reoccurrences,” Park said.

Another big change announced by Park is publicly disclosing all the stocks invested in by the NPS in order to enhance transparency. Currently, the fund only reveals records of holdings that it owns more than a 5 percent stake in.

In line with its tougher stance, the retirement fund operator is also considering suing Samsung Securities over the fat-finger trading error that caused its stock prices to plummet.

Samsung Securities mistakenly delivered 112.6 trillion won ($104.7 billion) worth of nonexistent shares to employees as part of its stock dividend plan on April 6 because of an input error.

“The decision has yet to be made as we are still reviewing the size of the losses from the incident,” a source at the NPS said.

The investigation into Samsung Securities will run longer than was previously announced, as the Financial Supervisory Service extended the period to May 3.

The institutional investor, with over 620 trillion won in assets under its management, is not alone in pursuing a more assertive approach against Korean Air and Samsung Securities.

Samsung Securities investors who were excluded from the brokerage’s compensation plan filed a class action suit earlier this week.

Korean Air minority shareholders gathered to try and oust the Cho family from the airline’s management. The family has come under pressure after heiress Cho Hyun-min, who serves as the airline’s marketing executive, was accused of harassing and hurling water at an advertising executive.

Local law firm J&Partners started gathering minority shareholders of the airline to take collective action against the Chos on Tuesday.

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