NPS’ shareholder powers boostedShareholder meetings in March may be a bit more interesting than those in past years.
With the “fair economy bills” green-lit by the administration, the country’s largest pension fund will be in a better position to exercise its voting rights.
In a cabinet meeting Tuesday, amendments to three bills were approved: the Commercial Act, the Capital Market and Financial Investment Act and the National Pension Act.
The changes include granting more power to the National Pension Service (NPS).
Previously, the NPS had to issue a public notification when buying more than 1 percent of the shares of a company in which it already owned more than 5 percent. The notification had to be made within five days.
The only exception was in cases where it was just buying the shares for investment purposes and had no intention of voting to influence the board.
Under the new rules, the notification on a 1 percent change in ownership can be delayed until the 10th day of the following month in cases where the fund plans to push for a change to a company’s articles, where it plans to call for the firing of an executive for violations of the law or where it will push for a change in dividends.
The extended deadline is being allowed to maintain the element of surprise.
Another provision is to limit outside director terms to six years.
During his New Year’s address earlier this month, President Moon Jae-in emphasized the bigger role of the government in realizing the “fair economy.”
“[The government] will settle the ‘stewardship code’ while soon creating the foundation that will direct conglomerates toward sound management,” Moon said.
The business community immediately protested the government’s move to increase intervention in the private sector.
“We are seriously concerned about excessive intervention,” the Federation of Korean Industries (FKI) said in a statement. “The pension fund demanding amendments of articles as well as requesting the ousting of executives would increase the government’s meddling and thus impede the managerial autonomy.”
It also argued that limiting the term of outside directors will not only damage personnel flexibility but could also result in less qualified directors.
The FKI said that the increased involvement of the government will negatively affect corporate decision making and value creation.
The Korea Enterprise Federation said the government was basically giving the NPS a blank power of attorney.
One of the immediate challenges companies are facing is finding new outside directors in the limited time allowed. The burden on small- and medium-sized enterprises (SMEs) is seen as especially heavy.
The Korea Listed Companies Association estimated that 566 companies under the new regulations will have to hire 718 outside directors. That’s 28.3 percent of the 2,003 companies with fiscal year ends in December and 18.1 percent of the 3,973 outside directors.
Additionally, 116 companies, or 5.8 percent of the listed companies with fiscal year ends in December, have to hire two or more new outside directors.
BY LEE HO-JEONG [firstname.lastname@example.org]