This article was displayed on the ChosunBiz MoneyMove (MM) site at 9:59 a.m. on Dec. 7, 2025.
Listed companies have begun preparations to defend management control about four months ahead of the regular shareholders meeting in March next year. In particular, as cumulative voting has been mandated for companies with total assets of 2 trillion won or more, allowing minority shareholders to enter the board with a small amount of equity, more corporations are seeking to stagger directors' terms to prepare for management control disputes.
But there is a variable. The National Pension Service, a "big player," has a track record of consistently voting against this. To introduce a staggered-term system, the articles of incorporation must be amended, and the National Pension Service's opposition could lead to failure to adopt the system. Even if the articles are amended, it cannot be ruled out that, after being "marked" by the National Pension Service in the process, the fund could side with minority shareholders on director appointments.
◇ Staggered terms rise as a response to cumulative voting
According to the investment banking (IB) industry on the 7th, more corporations are seeking to adopt a staggered-term system to prepare to defend management control.
A staggered-term system spreads out directors' terms to prevent many vacancies from occurring on the board at once. For example, if a board has five seats and all terms expire at the same time, creating five vacancies at once, the likelihood that candidates favored by minority shareholders will enter the board increases accordingly.
With the second amendment to the Commercial Act in Aug., cumulative voting became mandatory, granting minority shareholders of large listed companies with total assets of 2 trillion won or more voting rights equal to the number of directors to be elected multiplied by each share held. The more directors to be elected, the higher the chance that directors favored by minority shareholders will be chosen.
Because the mandatory cumulative voting will take effect starting in Aug. next year, one year after the promulgation of the second Commercial Act amendment, it will not apply immediately to the regular shareholders meetings in March next year. In effect, the mandatory cumulative voting is expected to apply from the 2027 regular shareholders meetings. Therefore, from the corporations' perspective, the aim is to amend the articles in advance to buy time to prepare for the next shareholders meeting.
The way corporations prepare for cumulative voting is to change the board composition so that directors' terms do not end all at once but are staggered. However, in practice, it is difficult to ask sitting directors to resign midterm. The alternative, therefore, is to amend the company's articles of incorporation.
If the articles are revised from "the term of directors shall be three years" to "the term of directors shall be within three years," the terms of outside directors can be set differently at the time of appointment. For example, if A is appointed for three years, B for two years, and C for one year, their terms will not expire at the same time, allowing the corporation to buy time to defend management control. To change the articles, a special resolution of the shareholders meeting (at least 67% in favor) must pass.
◇ Samsung Fire & Marine, Samsung Card, and Krafton tried, but...
The key to a staggered-term system is whether the National Pension Service supports it. The National Pension Service has almost always voted against corporations' attempts to introduce staggered terms.
The most recent notable case is Samsung Fire & Marine. At the regular shareholders meeting in March, Samsung Fire & Marine sought to diversify director terms by amending the articles to state "the term of directors shall be within three years," but the National Pension Service voted against it. However, the agenda item passed despite the National Pension Service's opposition.
A similar attempt was made at this year's Samsung Card regular shareholders meeting, but the National Pension Service opposed it. In addition, at the shareholders meetings of Krafton, LS Eco Energy, Kolmar Korea, Kolmar Holdings, Gaon Cable, TAEYOUNG E&C, EcoPro Materials, and others, the National Pension Service voted against such article-amendment items. In effect, it sided with minority shareholders.
The National Pension Service's Stewardship Responsibility Committee has consistently said it opposes "shortening or extending the terms of outside directors without justifiable reason." This is based on Article 16 of the National Pension Service's detailed standards for exercising voting rights on domestic stocks.
Fundamentally, the National Pension Service has maintained opposition to staggered terms as well. Article 15 of the same detailed standards states, "Support abolishing staggered terms and oppose introducing them," adding, "However, if there is a justifiable reason, voting may be exercised differently."
In other words, it can also be interpreted to mean that if there is a "justifiable reason," it may support changing outside directors' terms and introducing staggered terms.
In fact, the National Pension Service is understood to have cast favorable votes for staggered terms in a few exceptional situations. A university professor who served on the stewardship committee said, "When adjusting incumbent directors' terms to add a female outside director, or when a company is split and the board size must be reduced, the National Pension Service tends to support it."
A capital markets attorney said, "By contrast, if a company is facing a management control dispute, a shareholder proposal, or a hedge fund attack, or if it only writes a vague phrase like 'management needs of the company' without specifying concrete circumstances, the National Pension Service is likely to see it as merely for management defense and oppose it."