With about half of listed companies holding regular shareholder meetings on the 26th, shareholder attention is focused on how the National Pension Service will exercise its voting rights. The National Pension Service earlier said it would actively exercise voting rights to protect the interests of general shareholders. However, data show that only about 4% of the agenda items the National Pension Service opposed last year were actually voted down. Experts say the rejection rate is low, but the fact that the National Pension Service presents its views is meaningful.
The National Pension Service's Trustee Responsibility Committee held its fifth meeting on the 19th and reviewed how to exercise voting rights on shareholder meeting agenda items at 13 companies: HS Hyosung Advanced Materials, LG Electronics, POSCO FUTURE M, Naver, Woori Financial Group, POSCO Holdings, Korea Zinc, Hana Financial Group, KB Financial Group, KT&G, Shinhan Financial Group, Hitejinro, and Hansol Chemical.
The National Pension Service divides decisions on exercising voting rights between the Fund Management Headquarters and the Stewardship Responsibility Expert Committee. In most cases, the Fund Management Headquarters decides how to vote on shares it holds based on internal guidelines, while the Expert Committee separately reviews and resolves important matters such as large mergers and acquisitions (M&A), management control disputes, and items related to controlling shareholders.
At this meeting, the National Pension Service expressed opposition to 13 items, including the appointment of board director Cho Hyun-sang, HS Hyosung vice chairman; the appointment of board director Jin Ok-dong, Shinhan Financial Group chairman; approval of director compensation limits at Naver and KB Financial Group; and approval of Hansol Chemical's plan to dispose of treasury shares. Separately, the Fund Management Headquarters has also said it will cast opposing votes on some of the shareholder meeting items scheduled for March.
Companies are growing more nervous as the National Pension Service actively voices its views. As an institutional investor holding about 5%–10% equity in major listed companies, it can effectively serve as a casting vote at some corporations. In addition, the National Pension Service's voting direction can influence foreign investors and minority shareholders, which is a burden for companies.
In particular, the National Pension Service has said it will actively exercise voting rights to protect general shareholder interests in line with the intent of the Commercial Act revisions. Accordingly, while it previously disclosed its voting direction in advance only for corporations in which it held more than 10% equity, it will expand disclosure to those in which it holds more than 5% equity.
However, some analysts say that even when the National Pension Service voices opposition, agenda items are rarely voted down at actual shareholder meetings. According to corporate data research firm CEO Score, a review of the National Pension Service's voting dates, proposals, resolutions, and voting content found that last year it voted against 523 items (13%), but only 21 of those opposing items (4%) were rejected.
In recent cases, many items have passed as originally proposed despite opposition from the National Pension Service. On the 20th, the National Pension Service opposed Samsung C&T's proposal to appoint Lee Jung-sik, former Minister of Employment and Labor, as an outside director, but the item passed at the shareholder meeting. The proposal to appoint Mirae Asset Securities Vice Chairman Kim Mi-seop as an inside director also passed as originally proposed at the shareholder meeting on the 24th despite the National Pension Service's opposition. The proposal to reappoint Hanjin Group Chairman Cho Won-tae as an inside director also passed at the shareholder meeting on the 26th with an approval rate of over 90%.
There are, however, cases in which items opposed by the National Pension Service have been voted down. On the 19th, the National Pension Service voted against Hyosung Heavy Industries' proposal to reduce the number of directors, and it was actually rejected. The reason was that reducing the number of directors could weaken the effectiveness of the "cumulative voting system" introduced by revisions to the Commercial Act and make it harder for minority shareholders to enter the board.
Experts say the National Pension Service's opposition does not often lead to actual rejection, but it serves to set standards in the market. Kim Yong-jin, a professor of business administration at Sogang University, said, "In corporations where the major shareholder's equity is high, it is difficult for opposition from the National Pension Service to lead to actual rejection," adding, "Simply clarifying in advance how the National Pension Service will vote can serve as a kind of signpost for foreign investors and proxy advisory firms."
He added, "Ordinary resolutions often pass with support from major shareholders and friendly equity, but for special resolutions such as amending the articles of incorporation, at least two-thirds of shareholders present and at least one-third of the total issued shares must approve, so there is a real possibility that the National Pension Service's influence could take effect."