The voting rate of asset management companies last year was recorded at 91.6%. This represents a significant improvement compared to 79.6% the previous year, but it is still considered insufficient compared to major pension funds. Additionally, there is a considerable need for improvement in the method of documenting reasons for not voting or voting against.
The Financial Supervisory Service (FSS) revealed on the 4th that, as a result of investigating the voting disclosures of 273 asset management companies, this is how the voting rate of asset management companies was tallied.
Asset management companies have a 'fiduciary duty' to maximize the interests of investors as they manage investors' assets. Accordingly, exercising voting rights regarding investments is considered a fundamental responsibility that should be done for the benefit of investors. The FSS checks and announces the voting activity of asset management companies annually.
From last April to this March, asset management companies participated in a total of 28,969 matters. Among these, 24,015 were in favor, and 1,973 were against. Matters where voting rights were not exercised or were exercised with a neutral opinion totaled 2,981.
The FSS noted that "there are matters that must be neutrally voted upon because of the presence of affiliated companies, and there are characteristics of asset management companies," yet also assessed that "even excluding neutral votes, the proportion of non-exercised votes is considerably high."
It was also revealed that the documentation of reasons for exercising or not exercising voting rights by asset management companies is somewhat inadequate. Asset management companies should specifically detail the reasons for exercising or not exercising voting rights for investors to refer to in their investment decisions, but many instances relied on formal documentation.
Among the 283 asset management companies inspected, 72 reported that for more than half of the voting matters, they stated 'minimal impact on general meetings' or 'no infringement of shareholder rights.' The asset management company noted as a good case opposed the 'approval of the limit on director compensation,' citing specific provisions considering the company's operating profit and outlook. Conversely, an insufficient case was identified where a company did not exercise voting rights for all matters of all held items, instead stating as a blanket remark that "there is no significant impact on fund profits and losses."
By asset management company, Mirae Asset, Kyobo AXA, Truston, and Shin Young were rated relatively positively. Mirae Asset recorded a voting rights exercise rate of 99.3% while holding a variety of items within its fund and reportedly elaborated on reasons based on analytical findings.
However, among the top five firms holding listed shares, Korea Investment and KB revealed a duplication rate exceeding 80% for reasons of exercising and not exercising voting rights, indicating a need for improvement. Additionally, most private equity firms did not comply with documentation deadlines regarding voting rights, and some public fund managers were found to have delayed or omitted disclosures.
The FSS stated, "While the voting rate is gradually improving, many areas requiring improvement in documentation and related work systems were found," adding that "it seems to still fall short of the intent of the Capital Markets Act, which aims to ensure diligent voting and disclosure in favor of investor interests."
It added, "We will conduct various inspections on asset management companies' voting disclosures to fulfill the responsibilities of institutional investor trustees and will establish a voting rights comparison and disclosure system for investors to identify diligent trustees, and improve the operation of the stewardship code (guidelines for exercising voting rights)."