NPS studies stewardship code adoption in 2017

The National Pension Service (NPS) is preparing to introduce a Stewardship Code which is aimed at encouraging institutional investors to actively participate in management decisions of companies, as Moon Jae-in of the Democratic Party, an advocate of better corporate governance, appears to win South Korea’s presidential election.

NPS, with $500 billion under management, has begun the process of outsourcing a research for the introduction of Stewardship Code, a set of guidelines for institutional investors. It received applications for the five-month research contract by May 8, according to the welfare ministry.

“The research outsourcing is to find the obstacles to introducing the Stewardship Code and how to tackle them, taking into consideration the characteristic of the National Pension Service as a financial investor,” said an NPS source.

Previously, the world’s third-largest pension fund was lukewarm about the Stewardship Code adoption because of its possible repercussions for the domestic financial market.

But it changed its stance on the guidelines, after key presidential candidates vowed to beef up shareholder rights and enhance corporate governance during presidential election campaigns.

According to exit polls, Moon won the presidential election held on May 9.

South Korea’s top financial watchdog, Financial Services Commission, introduced its own version of Stewardship Code last December. But none of institutional investors in the country have adopted the system up to now.

NPS holds shares in around 750 listed companies in South Korea, and owns more than 5% stakes in 350 firms. It is the single largest shareholder in Samsung Electronics Co. Ltd. with a 9.22% stake at end-2016.

By Ilgyu Kim

Black0419@hankyung.com