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NPS to increase clout on chaebol

Major conglomerates wary of pension fund’s move to expand veto rights

The National Pension Service is set to tighten its control on chaebol as the revised bill on the “10 percent rules” will likely pass through the plenary session of the National Assembly soon.

The revised bill on the capital market involves financial authorities’ policy to allow the nation’s three major public funds to hold a 10 percent stake or more in a company ― as an exception from other stock investors.

The bill, which recently worked through the National Policy Committee of the National Assembly, has to garner approval from lawmakers of the Legislation and Judiciary Committee and the plenary session of the National Assembly.

Some officials at business lobbies cast concern that more powerful voting rights of the NPS and two other funds ― the Government Employees Pension Service and the Korea Teachers Pension ― will restrict or hamper corporate activities.

The Park Geun-hye administration, however, included the plan to bolster the voting rights of public funds on the list of its state affairs last February.

Financial authorities and some economists expect the revised rules will hold a greater efficacy in terms of minimizing small investors’ damages from possibly irregular stock trading among insiders at family-owned business groups.

Amid its expanded presence in the conglomerate sector as a main institutional investor, the ratio of opposition votes cast by the NPS have continued to increase over the past few years, according to the Financial Supervisory Service.

While the ratio of vetoes by the NPS at board meetings of chaebol groups stood at 5.4 percent of all votes in 2008, it climbed to 6.6 percent in 2009, 8.1 percent in 2010, 7 percent in 2011 and 18.4 percent in 2012.

The fund investor also exercised its veto power at an average rate of 12.5 percent so far this year, though its opposition ballot was not linked to the dismissal of group owners or board members.

Among major cases were its opposition ballots to the proposition of reappointing Hyundai Motor Group chairman Chung Mong-koo to the board of directors of Hyundai Mobis and SK Group chairman Chey Tae-won to the same post of SK C&C.

Other conglomerates such as Lotte Group, CJ Group and Hyundai Group underwent similar setbacks from the fund.

An FSS official said an investor with a minimum stake of 5 percent in a company is entitled to access details of the firm’s financial statements.

He said the NPS has attained the shareholder position that could tackle management of many conglomerate-based business units.

In addition, the NPS has expanded its presence in the financial industry since the Financial Services Commission paved the way for the fund to increase its stake in commercial banks about a year ago.

By Kim Yon-se (kys@heraldcorp.com)
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