An internal audit report of the Nation Pension Service of Korea (NPS) has called for the state pension fund to further strengthen its stewardship efforts.
The report, released on September 11, said NPS needs to pay more attention to stewardship activities, urging it to “make sure that its voting rights as a shareholder are exercised in a proper manner”.
The results came about a month after the Board of Audit and Inspection warned NPS about inconsistency in applying its principles of stewardship. The state audit agency said in a report on July 30 that the pension fund should exercise voting rights in a more consistent manner, especially on the election of board members of companies where it holds stakes.
NPS has stepped up efforts to enhance stewardship for the last few years, following suit with many other global institutional investors. However, there has been consistent demand from political and academic circles and civic groups in the country that it needs to be more aggressive in its stewardship and shareholder engagement.
The pension fund adopted the stewardship code and created a department dedicated to fiduciary issues in 2018. It also developed guidelines on its stewardship activities in 2019.
According to the guidelines, NPS can actively engage with the board and management of portfolio companies if there are concerns that could damage shareholders as a result of poor dividend policies, illegal actions or other unexpected issues.
Hanjin KAL is one of the major companies with which NPS has been actively engaging. The pension fund filed a shareholder proposal with the holding company of Hanjin Group last year, asking to ban those sentenced to imprisonment due to embezzlement and breach of trust from serving as a board member. The proposal was voted down. (Reporting by Hye-ran Kim)