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NPS hikes stake in local firms upon eased rules

Pension funds’ moves raise hopes for shareholder’s rights, worries over management interference

The National Pension Service headquarters in Jeonju, North Jeolla Province (Yonhap)
The National Pension Service headquarters in Jeonju, North Jeolla Province (Yonhap)

South Korea’s state-run pension operator has sharply increased its stakes in major listed firms after investment rules were eased at the beginning of this month, a financial market tracker said Sunday.

As of end-January, the number of listed companies in which the National Pension Service held 5 percent or more stake came to 313, up 7.2 percent from the end of 2018, according to data compiled by FN Guide.

The NPS held 10 percent or more stake in 96 companies -- up 20 percent on-year.

The pension operator was the largest shareholder in nine listed firms -- KT, Posco, Naver, KT&G, BNK Financial Group, Shinhan Financial Group, Hana Financial Group, KB Financial Group, and DGB Financial Group.

The surge was attributed to the alleviation of the so-called “5 percent rule,” which previously obligated stock investors to disclose their equity portfolio within five days of any change -- in case their stakeholding affected managerial decision-making rights.

The eased rule, along with a set of guidelines on shareholder activism approved in December, allowed the NPS to expand its leverage in corporate governance.

Also, under the revised Capital Market Act which took effect on Feb. 1, the NPS can call for the dismissal of corporate directors who are suspected of illegal activities and change a company’s articles of association, if needed.

Such increased shareholder power has raised some concerns that the NPS could excessively interfere in business management.

Last year, the NPS voted against 16.48 percent, or 682 out of 4,139 agenda at shareholders meetings. This was up 4.63 percentage points from two years earlier.

By Jie Ye-eun (