South Korea’s largest institutional investor National Pension Service (NPS) is taking steps to play a more aggressive shareholder role by going as far as pushing out board members for wrongdoings or mismanagement.

A guideline released by the Ministry of Health and Welfare Tuesday outlined how NPS, the world’s third-largest pension fund with over 700 trillion won ($599 billion) assets under management, intends to become more engaged in management to uphold shareholder rights.

Under the proposal, NPS is considering measures to remove certain board members of companies that are convicted of corporate crimes, such as embezzlement and breach of duty, as well as those firms that repeatedly cast a dissenting vote at board meetings. Companies that have a weak dividend policy or hand out extravagant executive pay packages would also be subject to greater scrutiny.

The health ministry is expected to hold a hearing on the proposal Wednesday and announce the final guidelines later this month.

The ministry explained the move is designed to “bolster NPS’s long-term profits and shareholder value as well as bring more market predictability to shareholder-related activities.”

NPS’s shift toward greater shareholder activism was hinted at earlier this year when it led a campaign to oust the late former chief executive of Korean Air Lines Co., Cho Yang-ho, from the company board, making him the first controlling shareholder of a Korean conglomerate to be stripped of the board seat. The pension fund then had also pushed to remove board directors convicted of crimes such as embezzlement and breach of duty as Cho was facing trial on such charges. The proposal, however, was struck down by shareholders in March. The case against Cho was also dismissed following his death in April.

By Chung Seung-hwan, Kim Je-lim and Kim Hyo-jin

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]