The Democratic Party of Korea is pushing a plan to reflect stewardship code compliance evaluations when selecting delegated asset management firms that operate National Pension funds. The aim is to enhance the effectiveness of institutional investors' stewardship codes by using the National Pension as an incentive.
The Democratic Party's "Korea Premium K-capital market special committee" received briefings on the 5th at the National Assembly from related agencies including the Financial Services Commission, the Financial Supervisory Service, the Ministry of Health and Welfare, and the National Pension Service (NPS). The briefing reviewed the stewardship code compliance evaluation system and discussed ways to improve the制度.
Oh Ki-hyeong, a Democratic Party lawmaker who serves as chairperson, said, "The stewardship code is originally a system run autonomously by the private sector, but it is necessary to check whether it has worked properly so far," and added, "If the current system is successful, no separate institutional improvement is needed, but if the standards themselves are wrong or there were problems in the execution process, improvements are necessary."
The special committee will draw up an amendment to the National Pension Act that includes whether "stewardship code compliance" is met in the criteria for selecting private delegated managers that receive and manage funds from the National Pension. The stewardship code is a method by which pension funds guide the management of private corporations in a certain direction through the equity they hold. It was introduced in Korea in 2016, but it has been operated as a voluntary norm to date, leading to criticism that its effectiveness is weak.
Kim Nam-geun, a Democratic Party lawmaker on the special committee, met with reporters after the briefing and said, "The National Pension Service (NPS) directly manages half of the fund it operates and entrusts the other half to asset managers," and added, "For the entrusted portion, the National Pension will evaluate compliance on its own, and for the directly managed portion, the National Pension and the Ministry of Health and Welfare will both be involved in the review."
Kim added, "Until now, when entrusting to asset managers, the National Pension only checked whether they had signed on to the stewardship code, but we will establish new standards to strengthen differentiation," and said, "Asset allocation must reflect the evaluation results for asset managers to engage more proactively in stewardship activities."
Kim also said, "At this year's shareholders meetings, asset managers are expected to engage in more proactive stewardship code activities," and emphasized, "If we evaluate this and review again in May–June, it seems the (evaluation scores) will be reflected when (the National Pension's) asset manager entrustments are allocated next year."
Kim continued, "There was much criticism that the stewardship code was not applied at corporations among those invested in by the private equity fund MBK where funds from institutional investors such as the National Pension were injected," and said, "Going forward, we will apply the stewardship code when raising funds and to real estate investments as well."