The National Pension Service is showing signs of strengthening the exercise of rights as shareholders in connection with the controversy over Korean Air.
The National Pension Service Fund Administration dispatched an open letter to Korean Air on June 5th asking about the facts about the executives’ alleged deviations and their solutions.
This is the first time that the National Pension Service has exercised its shareholding rights to end open letters to companies holding stocks.
Earlier, the National Pension Service Fund Committee expressed concern about illegal activities and bribery of HanjinGroup Chairman Cho Yang-ho’s family on May 30th, while making a more aggressive announcement on the right to send open letters and hold meetings with executives.
In addition, the Ministry of Health and Welfare and the National Pension Service are promoting measure to expand the scope of shareholder rights to ‘management participation’ (influence on management) when introducing the ‘Stewardship Code’, which contains instructions on voting rights of institutional investors in July.
If the scope exercising the shareholdings of the National Pension Service expands, it will become possible to demand the retirement of the total number of family members who have committed unlawful acts.
Officials are expecting that the vicious cycle of returning to the management line ofthe family members that caused the scandal when the issue is calm can be cut off.
Until now, the scope of exercising the shareholding rights of the National Pension Service has been limited to simple investment levels such as exercising voting rights of shareholders and meeting for expansion of dividends.
“The fourth principle stipulation of the Stewardship Code related to the exercise of shareholders’ rights and the provision of regulations to allow participation in management are reviewed on the basis of fund management and voting right,” said an official of the Ministry of Health and Welfare.
The introduction of the Stewardship Code of the National Pension Service is also a presidential pledge by President Moon Jae-in, and it is expected that discussions on expansion of shareholder rights will be more flexible. However, the Business community is opposed to expanding the exercise of the shareholding rights of the National Pension Service because of the violation of the management rights and the risks of the government’s ineffectiveness.
Meanwhile, the National Pension Service Fund is the second largest shareholder with 12.45 percent of the share of Korean Air and the second largest shareholder with 11.81 percent of Hanjin Group holdings company, HanjinKal.