As previously advised, the Stewardship Code Development Committee, the Korea Institute of Corporate Governance and Sustainability, and relevant ministries and agencies (i.e., the Financial Services Commission, the Ministry of Health and Welfare, the Ministry of Personnel Management, the Ministry of Education, the Korea Post, and the Financial Supervisory Service) reviewed the need to amend and supplement the Stewardship Code, which was first introduced in 2016—particularly the rules governing institutional investors’ exercise of shareholder rights. As a result, on December 29, 2025, they announced a number of measures to strengthen the Stewardship Code (Link).
Reflecting these policies to strengthen institutional investors’ exercise of voting rights and shareholder rights, on February 10, 2026, the Ministry of Health and Welfare announced that it will promote measures to strengthen stewardship activities of the National Pension Service (“NPS”), including (i) expanding the scope of NPS's prior disclosure of voting directions and (ii) improving the requirements for engaging in dialogue with companies about designated key management issues.
Pursuant to decisions of the Specialized Committee on Stewardship Responsibilities, starting from ordinary shareholders’ meetings in March 2026, NPS will expand the scope of its prior disclosure regarding the voting directions of the National Pension Fund from “(a) all agenda items of a company in which NPS holds 10% or more shares or that accounts for 1% or more of its portfolio and (b) all agenda items of a company’s general meeting of shareholders including agenda items decided by the Specialized Committee on Stewardship Responsibilities” to “(a) all agenda items of a company in which NPS holds 5% or more shares or that accounts for 1% or more of its portfolio, and (b) all agenda items of a company’s general meeting of shareholders including agenda items decided by the Specialized Committee on Stewardship Responsibilities.” In addition, if the Specialized Committee on Stewardship Responsibilities decides to vote against a proposal, NPS will fully disclose detailed reasons for opposition, including the grounds for its negative vote. Of the total 3,122 agenda items on which the NPS exercised voting rights in 2025, 292 items (9.8%) were subject to prior disclosure. If the scope of prior disclosure is expanded as above, that number is expected to increase to 1,280 items (43.1%).
In addition, NPS will amend the “Guidelines for the National Pension Fund’s Stewardship Activities for Domestic Equities” to ensure that a company's shareholder return efforts, such as the cancellation of treasury stock, are taken into account in its stewardship activities. Specifically, NPS has previously designated the “establishment of a company's dividend policy” as one of its key management issues, and where a company failed to establish a reasonable dividend policy [e.g., due to a low dividend payout ratio (cash dividends / net profit)] or failed to pay dividends in line with a reasonable dividend policy, NPS selected the company for non-public engagement (among other measures) and conducted “dialogue with the company.” Going forward, NPS will change the criteria for proceeding with non-public engagement and related measures triggered by the designation of key management issues by replacing the dividend payout ratio with the total shareholder return ratio [(cash dividends + treasury share cancellations) / net income] so that shareholder return efforts beyond cash dividends—such as the cancellation of treasury shares—can also be considered as efforts to protect shareholders’ interests.
Because NPS holds substantial stakes across most listed Korean companies, these policy and guideline changes regarding its exercise of voting rights and stewardship activities are drawing attention from the market and the companies, as they may significantly affect the conduct of shareholders’ meetings and board operations, decisions on shareholder return policies, and related disclosures and implementation in the 2026 shareholders’ meeting season. In particular, because the scope of NPS's pre-disclosure of voting decisions prior to shareholders’ meetings will be substantially expanded, and the reasons for NPS’s opposition to company proposals will be publicly announced in detail, these changes may have a significant impact on proxy solicitation activities, investor relations, and the formation of public opinion among the media and market investors prior to shareholders’ meetings. Moreover, as the total shareholder return ratio rather than the dividend payout ratio has officially become the standard for NPS’s exercise of shareholder rights and stewardship activities, these regulatory changes should be carefully reflected in companies’ capital allocation and shareholder return policy decisions, together with the legislative progress of the proposed amendment to the Commercial Code mandating the cancellation of treasury shares (Link).
