Will pension fund have more sway in chaebol?

Jun Kwang-woo NPS chairman

Will pension fund have more sway in chaebol?

Korea’s jumbo pension fund now controls a significantly larger chunk of chaebol than their chairmen, industry figures showed Wednesday. Whether it decides to pull its weight in corporate decision-making processes, however, remains to be seen.

According to figures from Chaebul.com, a researcher of big businesses, the National Pension Fund (NPS) owned 4.14 percent of the 93 affiliates of the country’s top-10 business groups as of June, up 0.48 percentage points from a year ago to renew its all-time high. In comparison, the chairman of these groups collectively held 1.98 percent of their family companies, down 0.1 points from a year ago.

The NPS owned more than a 5 percent share in 48 of the companies. It owns 6.59 percent of Samsung Electronics and 6.75 percent of Hyundai Motor, the duo of corporate giants atop the pecking order of Korea Inc. Samsung Electronics Chairman Lee Kun-hee holds 3.31 percent of Samsung affiliates, compared to the pension fund’s 6 percent.

“Shareholders with a stake of 5 percent plus are given expansive rights to access the companies’ financial records. The NPS is certainly in a position where it could influence corporate management at chaebol,’’ said Jung Sun-sup, the head of Chaebul.com.

“The NPS in the past year has increased its stakes in every top-10 business group aside of Hanwha.’’

The pension fund’s increasing presence in chaebol, or the country’s mighty family-owned conglomerates, has critics raising calls that it should be more assertive in influencing decisions and monitoring the behavior of these companies, which are often accused of irresponsible risk taking and corruption.

Hanwha Chairman Kim Seung-youn last month was imprisoned after a court found him guilty of embezzling corporate funds. SK Chairman Chey Tae-won might face a similar fate as he has been accused of breaching company coffers to patch up massive personal losses from a futures investment.

The NPS’s future role in the management of big firms is getting larger attention as Koreans prepare to pick a new president. “Economic democracy’’ has become a new buzz phrase for this year’s elections as political parties from left and right compete to present new ideas to lessen the concentration of wealth and power at chaebol and restore a sense of parity into Korea’s business scene.

The NPS is the world’s fourth-largest pension fund, with 380 trillion won under management as of August. Its assets are expected by the end of this month to eclipse those of the Netherlands’ ABP, to rank third in the world, NPS officials say.

NPS’ holding of chaebol stakes is expected to get larger in the future. The Financial Services Commission (FSC) is considering easing regulations that require the pension fund to report any changes in stake holdings in companies where it holds more than a 10 percent share.

This would allow further freedom for NPS to purchase corporate shares. NPS officials say that the current rules dissuaded them from purchasing a larger share in companies because the immediate reporting of stock-holding changes would have exposed its investment strategy.   <The Korea Times/Jun Kwang-woo> 

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