It was reported on the 22nd that the Democratic Party of Korea is pushing to amend the law to strengthen the application of the "stewardship code" to the National Pension's fund management. The stewardship code is a method by which the government guides the management of private corporations in a certain direction through the equity in those corporations held by pension funds. As part of the stock market revitalization policy pursued by the Lee Jae-myung administration, the Democratic Party plans to actively use the stewardship code.
According to ChosunBiz's reporting, the Democratic Party's KOSPI 5000 special committee has begun drafting an amendment to the National Pension Act that would include compliance with the "stewardship code" among the criteria for selecting private entrusted managers that receive funds from the National Pension. The bill is expected to be introduced in early Mar.
The Democratic Party is said to be referencing the approach of Japan's public pension (GPIF). When GPIF entrusts funds to an asset management company, it requires the manager to submit how it exercised voting rights, which agenda items at corporations' general meetings of shareholders it supported or opposed, and the reasons why.
In Korea, the stewardship code was introduced in Dec. 2016, but it has so far been operated as a voluntary norm. It has been criticized for lacking effectiveness because it is not binding.
The Democratic Party's plan to strengthen the stewardship code is to reflect in manager selection whether the asset managers that invest money from the National Pension actively exercised voting rights. A key official of the Democratic Party's KOSPI 5000 special committee said, "The stewardship code is an existing concept; the key is how much we make it applicable on the ground," adding, "We intend to create a basis for the National Pension to use stewardship code evaluations when selecting entrusted managers."
The Democratic Party plans to unveil measures to activate the stewardship code at a National Assembly forum on the 23rd. Earlier, President Lee Jae-myung also called on the National Pension to strengthen the stewardship code. At a National Pension Service (NPS) work briefing on Jan. 16, the president said, "We hold people's stocks, so we should exercise voting rights," adding, "We should maintain at least minimal control."
There is a possibility that the plan to reflect stewardship code compliance in selecting entrusted managers will be expanded to other pension funds, such as the Government Employees Pension and the Teachers' Pension.
Of the National Pension's total fund of 1,473 trillion won, about half, or 719.9 trillion won, is entrusted to private managers. Given that 369 domestic and overseas asset management companies participate in entrusted management, each manager effectively runs about 2 trillion won.