The National Pension Service is mounting an unprecedented proxy offensive, casting a series of "against" or "abstain" votes at regular shareholder meetings of major conglomerates such as Korea Zinc and Hanjin KAL. With the introduction of the "cumulative voting system" slated for Sept., corporate circles facing a collapse of their management defense walls are increasingly anxious.
On the 23rd, according to the securities industry, the National Pension Service recently decided to oppose Hanjin KAL Chairman Cho Won-tae's board appointment, citing "damage to shareholder value." Hanjin KAL is 5.44% owned by the National Pension Service and 10.58% by the Korea Development Bank. With Cho's side holding around 30% even after counting friendly equity, the pension fund's opposition is expected to serve as a catalyst to rally minority shareholders and other blocs.
The National Pension Service's moves are also pivotal in the Korea Zinc management control dispute. The fund chose to "abstain" on incumbent management candidates, including Chairman Choi Yun-beom. Young Poong and MBK Partners called this "effectively a no-confidence vote in the current management system," seeking to win over minority shareholders. In addition, the National Pension Service has unfurled a string of opposition flags against the appointment of Jin Ok-dong as chairman of Shinhan Financial Group and against proposals to approve compensation limits at Naver and KB Financial.
In addition, at Shinhan Financial Group, the National Pension Service plans to vote against the proposal to appoint Jin Ok-dong as a director, and at Naver and KB Financial Group, it plans to vote against proposals to approve compensation limits.
There are projections that the National Pension Service's more assertive exercise of voting rights will sway minority shareholders. Retail investors who had little interest in shareholder meeting agendas may join the pension fund's lead, and if they express no confidence in incumbent management, defending management control could become even more difficult.
What makes corporate circles even more nervous is the "cumulative voting system," set to take effect in Sept. If this system, which allows a shareholder to allocate as many votes per share as the number of directors to a single candidate, is introduced, the National Pension Service with a lower equity stake or a coalition of minority shareholders will find it far easier to place their preferred figures on the board.
With the government tightening the stewardship code and pushing to amend the Commercial Act, the influence of controlling shareholders' voting rights is steadily weakening. A person in the investment banking industry said, "With institutional reforms such as the introduction of the cumulative voting system and the National Pension Service actively exercising its voting rights, the structure inevitably affects retail investors," adding, "If the cumulative voting system takes effect in Sept. this year, it will become even harder for corporate circles to defend management control."