On March 7, 2023, the National Pension Fund Management Committee (“FMC”) issued a press release regarding its first FMC meeting in 2023. According to the press release, the above meeting deliberated and resolved on the draft National Pension Service Settlement of 2022, the draft amendment to the Guideline for Responsible Investment & Governance of the National Pension Fund, and the draft amendment to the Operation Regulations of the Special Committee on Responsible Investment & Governance (“SCRIG”), and received reports on the Result of Target Active Risk Allocation according to Each Asset Group in 2023 and the Operation Status of National Pension Fund as of the End of December 2022.
The key agenda items deliberated and resolved by the FMC are as follows:
1. Deliberation and Resolution on the Draft Amendment to the Guideline for Responsible Investment & Governance
The FMC added climate change and industrial safety to its list of considerations in selecting key management issues of the National Pension Service’s (“NPS”) investment targets that are required to fulfill stewardship responsibilities.
Meanwhile, the FMC failed to reach a consensus on the agenda to grant the SCRIG the exclusive authority to decide whether to file a shareholder derivative suit, which has been requested in relation to the expansion of the NPS’ filling shareholder derivative suits. As no resolution was made on the above agenda, the National Pension Service Investment Management (“NPSIM”) will determine whether to file a derivative lawsuit as it has done so far, and the SCRIG will decide only those matters that cannot be determined by the NPSIM or requested to be referred with the consent of at least one-third (1/3) of the SCRIG’s registered members.
2. Deliberation and Resolution on the Draft Amendment to the Operation Regulations of the SCRIG
The FMC resolved on a bill to change the composition of the SCRIG members, who play a key role in the decision-making process regarding the NPS’ exercise of shareholders’ rights, including the voting rights. Under the existing regulations, the SCRIG consists of nine members, with the regional members’ association, the employers’ association and the workers’ association recommending three members each, and three members among the nine being full-time members.
The FMC noted that six out of nine members of the SCRIG are presently attorneys and accountants because only those recommended by the above members’ associations eligible to be appointed as the SCRIG members under the existing regulations. The FMC also observed that due to such limitations, it is difficult for the SCRIG to be composed of experts from various fields. Under the draft amendment, however, three out of nine members of the SCRIG will be recommended by relevant professional organizations, in addition to the above members’ associations. As a result, the SCRIG will be able to include experts in various fields, including those who are experienced in asset management and ESG responsible investment, as its members, and further improve the SCRIG’s expertise.
The NPS holds a number of shares in most of the major listed companies in Korea. The above amendment of the regulations and the change in the composition of the SCRIG will likely have a significant impact on the NPS’ exercise of shareholders’ rights, including the voting rights, at the general meeting of shareholders in 2023 and thereafter. As such, it would be advisable for the listed companies to take the above into account in preparing their general meeting of shareholders.
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