The Financial Supervisory Service said asset managers' proxy voting and shareholder activities remain insufficient, limited to expressing support or opposition and simple inquiries. In response, the Financial Supervisory Service (FSS) plans to review asset managers' proxy voting records across the board and, at the same time, check whether they have built their own processes for exercising shareholder rights.
On the 24th afternoon, the Financial Supervisory Service held a roundtable at the Korea Financial Investment Association in Yeouido, Seoul, under the theme of "enhancing the rigor of proxy voting." The meeting was attended by Vice Governor Hwang Seon-oh of the Financial Supervisory Service's Capital Markets and Accounting, Korea Financial Investment Association Chairman Hwang Seong-yeop, and CEOs of 18 asset management companies.
At the event, participants discussed ways to strengthen asset managers' fulfillment of fiduciary responsibilities as trustees representing investors' interests, including proxy voting and disclosures.
Vice Governor Hwang assessed that while the asset management industry has played a part in opening the KOSPI 5000 era, it has fallen short in faithfully fulfilling its fiduciary role commensurate with its external growth and the trend of stronger shareholder rights.
In fact, the proxy voting participation rate is improving, from 79.6% in 2023 to 91.6% in 2024, but it still lags major domestic pension funds. In 2024, the National Pension Service recorded a 99.6% participation rate, and the Government Employees Pension Service posted 97.8%. Asset managers' shareholder activities also largely amount to simple inquiries.
Vice Governor Hwang said, "Social debates on revising and evaluating the implementation of the 'stewardship code' for institutional investors, including asset managers, are progressing actively," and stressed, "the industry should meet the expectations of capital market participants."
Hwang went on to urge concrete reviews and thorough related disclosures on individual agenda items at general meetings of shareholders so that investors can use them in their investment decisions.
Regarding the ongoing plan to improve the "stewardship code," the Financial Supervisory Service (FSS) said thorough preparation is needed as the first implementation inspections and evaluation results for asset managers and pension funds this year will be made public. Expansion of the applicable asset classes under discussion (listed shares → including unlisted shares and bonds, etc.) and the incorporation of ESG (environmental, social and governance) factors will also proceed without a hitch.
In addition, the Financial Supervisory Service (FSS) asked the asset management industry to make every effort to establish internal organization, secure personnel, and prepare KPIs to carry out fiduciary activities. It said that many asset managers lack dedicated units for proxy voting, decision-making bodies, and performance compensation systems such as KPIs, making it necessary for CEOs to pay special attention and personally oversee them.
In response, the asset management industry said that a shortage of specialized personnel, low benefits relative to costs due to fund diversification, and limits on influence stemming from low equity stakes have served as practical constraints on active exercise of shareholder rights, but it will continue to make improvements.
To further strengthen execution of fiduciary activities, participants suggested incentives for best-performing institutions and the provision of relevant training programs and best practices. To ensure the independence of fiduciary activities, they proposed declaring a principle of prioritizing beneficiaries' interests or establishing an internal committee within managers to gather opinions from external experts.
This year, the Financial Supervisory Service (FSS) plans to review asset managers' proxy voting records in full while also examining whether processes for exercising shareholder rights are in place. An FSS official said, "We will continue to communicate with the industry to ensure that asset managers' fiduciary activities are carried out faithfully and will actively identify and address areas in need of improvement."