NPS gets tough on sketchy directors

NPS gets tough on sketchy directors

Feb 25,2014

The National Pension Service (NPS), the country’s largest investor, made changes to its voting guidelines so it can reject the appointment of corrupt directors to boards of companies it invests in.
On Sunday, the JoongAng Ilbo secured a document with a revised guideline of how the NPS should exercise its voting rights as a shareholder this year.
According to the document, the NPS has decided to oppose conglomerate owners or businessmen being appointed or reappointed as directors of companies if they will diminish shareholder value because they have been engaged in embezzlement or breach of trust. People facing court trials are included.
The guideline stipulates that anyone opposed by the NPS should be opposed for three years.
And the NPS will announce its position on the director nominees to the public before exercising its vote at shareholders’ meetings.
“There have been people pointing out that the voting standard is too comprehensive and vague, so we made it clearer,” said an official from the NPS. “The revised guidelines will be applied starting with this year’s shareholder meetings.”
The revision comes at a time when a number of conglomerate family members have been tried for embezzlement and breach of trust.
They include SK Group Chairman Chey Tae-won and his younger brother Chey Jae-won, vice chairman of the group; CJ Group Chairman Lee Jay-hyun; Hyosung Group Chairman Cho Suck-rai and his eldest son, Cho Hyun-joon, president of the group; Tongyang Group Chairman Hyun Jae-hyun; LIG Group Chairman Koo Cha-won; and his first son, Koo Bon-sang, vice chairman of LIG Nex1.
Meanwhile, the NPS also plans to vote against the reappointment of directors who have served more than 10 years on the boards of companies.
Directors that fail to attend more than 75 percent of board meetings will also be opposed for reappointment by the NPS.
The position of the NPS will be made public before they attend the shareholders’ meeting. Previously, guidelines had stipulated that it only needed to make its position known “if necessary.”
Many big groups are holding shareholders’ meetings next month.
“This would eventually mean that the government, using people’s retirement funds, will interfere in private business management,” grumbled one conglomerate official.
As of November, the NPS had 423 trillion won ($393.7 billion) worth of reserved funds. Of that amount, 84 trillion won is currently invested in local stocks. It holds more than 7 percent of the shares of Samsung Electronics, which is more than the amount owned by Chairman Lee Kun-hee (3.3 percent).
It owns 7.5 percent of Posco’s shares, 8.98 percent of Naver’s and 9.15 percent of SK Hynix’s.
“If the NPS’s position is revealed before voting, it could affect the decisions of other institutional and retail investors,” said an official from the Federation of Korean Industries.
According to Kwak Kwan-hoon, a law professor at Sunmoon University, “The NPS should not forget the fact that it is the people who are paying into the fund for their life after retirement.”
BY KIM HYUN-YE [angie@joongang.co.kr]

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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