The National Pension Fund has changed the purpose of its equity holdings in certain corporations from 'simple investment' to 'general investment.' This allows for more active shareholder activities, such as demands for increased dividends and improved governance, which were not possible before.
According to the Financial Supervisory Service's electronic disclosure system on the 28th, the National Pension Fund will change the purpose of its equity holdings in Hanwha Aerospace (7.92%), HMM (5.99%), Yuhan Corporation (7.85%), Samyang Foods (9.58%), HD Hyundai (7.47%), Hyundai GLOVIS (10.09%), and Korea Aerospace Industries (8.12%) from 'simple investment' to 'general investment,' as disclosed on the 27th.
According to the enforcement decree of the Capital Market Act, investors holding more than 5% of a listed company's stock must disclose their purpose for holding the equity. The purposes for holding equity are classified into three categories: ▲ simple investment ▲ general investment ▲ influence on management rights.
Simple investment refers to passive participation, such as exercising voting rights only on agenda items at shareholder meetings. In contrast, general investment entails active shareholder activities without the intention of influencing management rights. This includes actions such as requesting increased dividends, demanding improvements in governance, and voting against the appointment of directors and auditors.
This change in holding purpose is interpreted as a measure by the National Pension Fund to consider active shareholder activities. Previously, as a major shareholder with 8% equity, the National Pension Fund opposed the spin-off agenda of Hyundai Department Store in 2023, resulting in its rejection. This was immediately after the change of the holding purpose from simple investment to general investment.
The change in the National Pension Fund's holding purpose has also been shown to impact actual investment revenue. According to a study published by a research fellow from the National Pension Fund Operation Committee on the 'disclosure effect of changes in holding purpose in the domestic stock market,' when the National Pension Fund changed its disclosure from simple investment to general investment, it experienced an excess return of 0.7 percentage points from the day before the disclosure until the next day. This reflects investors' expectations regarding improvements in governance. However, this was limited to a short-term effect.
There are also forecasts that 'representative lawsuits' led by pension funds may emerge in conjunction with amendments to the Commercial Act. As the scope of directors' duties expands, it will become easier to hold them accountable in cases of conflicts of interest or discrepancies with shareholder interests during the management decision-making process.
A representative lawsuit is a legal action in which shareholders pursue the liability of directors on behalf of the company. If the company suffers losses due to the illegal actions of a director, shareholders can file the suit as representatives. If successful, the compensation for damages is attributed not to the fund but to the respective corporation, enhancing the long-term shareholder value of the company. Under current commercial law, a shareholder holding more than 1% of the total issued shares of a corporation can become the representative.
Recently, financial authorities have also been working to strengthen the stewardship code (responsible shareholder activities by institutional investors). In February of this year, the Financial Services Commission proposed expanding the scope of fiduciary responsibilities and the assets subject to the stewardship code to enhance its effectiveness. Additionally, Lee Chan-jin, the newly appointed head of the Financial Supervisory Service, is also known to have emphasized the role of pension funds during his previous tenure as a member of the National Pension Fund Operation Committee.