As the National Pension Service changed its purpose for holding equity in Samsung Biologics(207940) from "passive investment" to "general investment," attention is focusing on the move. With Samsung Biologics facing a stack of pending issues such as labor-management conflict, wage talks, and shareholder dividends, some expect the National Pension Service to step up shareholder engagement in earnest.
According to the Financial Supervisory Service's electronic disclosure system on the 5th, the National Pension Service changed its purpose for holding equity in Samsung Biologics on Aug. 29. The National Pension Service had held Samsung Biologics shares for general investment, switched to passive investment in March 2024, and this time reverted to general investment. The National Pension Service's equity stake in Samsung Biologics rose 0.2 percentage point over the same period, from 6.68% to 6.88%, for the first time in about two years and four months.
When the National Pension Service holds 5% or more of a listed company's shares, it discloses the holding status and purpose. Holding purposes are classified as management participation, passive participation, and general investment. Management participation means exerting direct or indirect influence over corporate control. Passive investment is a limited form of participation that does not influence control but exercises voting rights on agenda items at shareholders' meetings.
General investment allows for more active exercise of shareholder rights, such as proposing dividends, opposing director appointments, amending the articles of incorporation, and filing for the dismissal of executives engaged in illegal acts. Like passive investment, it does not involve influencing corporate control. For this reason, some say the National Pension Service strengthened its purpose for holding equity to ramp up shareholder engagement at Samsung Biologics. The analysis is that there is no reason to change the investment purpose unless there is a need to raise its voice to corporations.
An official at the National Pension Service said, "We typically go through a formal decision-making process declaring that we will no longer make passive investments before changing the holding purpose," adding, "Under general investment, we can make shareholder proposals within a scope that does not amount to participation in control, including dividends, and confidential dialogue with corporations is possible."
Samsung Biologics has never paid shareholder dividends since its founding in 2011. Early this year, the company opted for no dividend to invest in production facilities and said it would outline a dividend policy in three years. Samsung Biologics posted consolidated revenue of 2.578 trillion won and operating profit of 1.1672 trillion won in the first half. With this year's revenue seen at 5 trillion won, wage talks are underway between labor and management, and some shareholders say they feel left out. With various pending issues piled up for shareholders, management, and employees to resolve, there is also speculation that the National Pension Service is moving to strengthen shareholder rights and interests.
A Samsung Biologics official said, "It is difficult to comment on the National Pension Service's change in investment purpose."
Earlier, the National Pension Service also flexed its muscle at the Hanmi Pharmaceutical(128940) shareholders' meeting. The National Pension Service changed its purpose for holding Hanmi Pharmaceutical shares from passive investment to general investment in Aug. 2024. At the time, Hanmi Pharmaceutical's founding family—siblings and a mother-daughter pair—were locked in a control dispute, and that December, a proposal to dismiss former CEO Park Jae-hyun and Hanyang Precision Co. Chairman Shin Dong-kuk from the board was put to an extraordinary shareholders' meeting. The siblings sought to oust Park and Shin to seize control of the board, but the move was thwarted after the National Pension Service opposed it. The National Pension Service said then, "The grounds for dismissal are insufficient."
As Hanmi Pharmaceutical's control dispute moved toward closure, the National Pension Service switched its holding purpose back from general investment to passive investment in March. Hanmi Pharmaceutical then put forward a proposal at the subsequent shareholders' meeting to appoint former National Assembly member Chae Yi-bae, and the National Pension Service opposed it, saying clearance from the Public Official Ethics Committee for post-public service employment had not been confirmed. The proposal passed with 80.6% support despite the National Pension Service's opposition. After receiving approval from the ethics committee, Chae became an outside director at Hanmi Pharmaceutical from late April and moved last month to serve as chief of staff to Prime Minister Han Seong-sook. As of June, the National Pension Service holds 10.3% equity in Hanmi Pharmaceutical.
In March, the National Pension Service also opposed an agenda item related to treasury shares at the Daewoong Pharmaceutical shareholders' meeting. Daewoong Pharmaceutical proposed adding an article to its articles of incorporation stating, "The company may, when necessary to achieve its business objectives, hold and dispose of its own shares in accordance with the Commercial Act." The National Pension Service opposed it, saying, "Given the company's equity structure, a disposal plan for treasury shares could be approved at the shareholders' meeting with only the controlling shareholder's support, and no measures have been identified to reflect the views of other general shareholders." The proposal nevertheless passed with 86.7% support despite the National Pension Service's opposition. As of last month, the National Pension Service holds 10.1% equity in Daewoong Pharmaceutical.
Retail shareholders generally welcome it when institutional investors like the National Pension Service speak up at corporations, as it raises the odds of shareholder-friendly policies such as expanded dividends. Corporations, however, are on edge. While stronger shareholder engagement by the National Pension Service does not mean interference in management, they cannot ignore situations where it exercises clout on major items such as canceling treasury shares or amending the articles of incorporation.
An official in the pharmaceutical industry said, "The National Pension Service is scrutinizing shareholders' meeting agenda items and often opposing them," adding, "From the standpoint of corporations, we have no choice but to pay attention to enhancing shareholder value."