NPS weighs whether to take on Chos and KAL

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NPS weighs whether to take on Chos and KAL

The National Pension Service (NPS) will decide whether to get more involved with the management of scandal-ridden Hanjin Group by next month.

On Wednesday, the NPS’s fund management committee held its first meeting for the year and discussed the scope of its involvement in the management of the group’s holding company, Hanjin Kal, and the group’s airline, Korean Air.

The NPS is the second largest shareholder in Korean Air with an 11.56 percent stake. The largest shareholder is Hanjin Kal, which holds a 33.35 percent share.

The NPS is also the third largest shareholder of Hanjin Kal with 7.34 percent of the shares. Hanjin Kal is the company Hanjin Group Chairman Cho Yang-ho and his relatives use to control the group.

The NPS delayed a final decision to early February.

The main issue for the NPS is whether to vote for or veto the re-election of Cho as chairman of Korean Air. Cho’s term at the country’s largest airline ends this year and shareholders will vote on his re-election at a shareholders’ meeting in March.

The Korea Corporate Governance Improvement (KCGI) activist fund recently upped its stake in Hanjin Kal to 10.71 percent, becoming the second-largest shareholder in the company after Cho and his family, who hold 28.93 percent. It has said it wants to tighten its watch on the company’s corporate governance.

The NPS adopted a stewardship code in July last year that dictates how it exercises its shareholder rights. It allows the pension fund to engage more actively in corporate management on the grounds of protecting its investments.

The Hanjin Group and its controlling family have endured a succession of embarrassing public scandals starting with the “nut rage” meltdown by the family’s eldest daughter Cho Hyun-ah in 2014. Other members of the clan including Chairman Cho, his wife Lee Myung-hee and younger daughter Cho Hyun-min were investigated for various misdeeds like embezzlement and smuggling last year.

Lee and two daughters were recommended to be prosecuted on charges of smuggling last month while Lee was indicted for assault early this month.

If the NPS decides to use its shareholder rights to influence management decisions of Hanjin affiliates, it will be the first time the fund actually exercises its new stewardship code.

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