"Responsibility Must Be Held if National Pension Suffers Losses Due to Excessive Representative Lawsuits"... Economic Circle 'Pushes Back'

KIAF "Executives and Review Committee Must Take Responsibility for Damage"

[Asia Economy Reporter Ki-min Lee] The business community has urged the introduction of a system that holds civil and criminal liability if losses occur in the National Pension Service (NPS) due to shareholder derivative lawsuits. Since derivative lawsuits have caused stock prices of companies to fall and resulted in losses for the NPS, it is argued that the National Pension Act should be amended to allow shareholders or companies to file lawsuits against the NPS.

The Korea Industrial Alliance Forum (KIAF) held an industrial development forum on the 25th under the theme "Diagnosis of Problems and Impacts of National Pension Derivative Lawsuits," stating that NPS executives or committees such as the Stewardship Committee (SCC) that can file shareholder derivative lawsuits should be held accountable when causing pension losses.

The rationale is that if no responsibility is taken when pension losses occur due to negligence or excessive litigation, it would lead to unfair outcomes, and if the derivative lawsuit is lost, only the companies and the public would suffer damages.

Choi Jun-seon, Honorary Professor at Sungkyunkwan University Law School, expressed concern, saying, "The NPS is expanding the scope of shareholder rights exercised by the SCC, which takes no responsibility for decisions made in derivative lawsuits, based on a distorted concept of fiduciary duty, thereby attempting to interfere with corporate management, damage reputations, and punish business leaders."

Additionally, unlike foreign pension funds, the NPS fills a significant number of SCC members with labor and civil society group nominees, which is pointed out as a limitation due to lack of independence. Jung Woo-yong, Policy Vice Chairman of the Korea Listed Companies Association, stated, "Foreign pension funds secure political independence by excluding government officials from fund management (Canada’s CPPIB) or outsourcing all management externally (Japan’s GPIF). Our NPS should also strengthen its independence."

Proposals were also made to amend the National Pension Act to grant the Fund Management Headquarters the authority to decide on derivative lawsuits and to establish criteria for filing lawsuits. Jung Man-ki, Chairman of KIAF, pointed out, "The NPS can be seen as an agent for the owners, the National Pension subscribers, so it should act within the scope of its agency rights and not cause losses to the owners." He added, "If they excessively file derivative lawsuits that cause the stock prices of sued companies to fall and consequently cause losses to the NPS, pension subscribers should be able to hold the NPS Fund Management Headquarters or executives and committee members of the Fund Management Committee or SCC civilly liable for damages."

In particular, Chairman Jung argued, "If more than 100 National Pension subscribers request, the National Pension Act should be amended to allow holding NPS executives or various committees civilly liable and, if illegal acts occur, criminally liable when they excessively file derivative lawsuits causing losses to the NPS."