[Initial Perspective] National Pension Service Should Consider Future Citizens, Not the Current Administration

[Asia Economy Reporter Park So-yeon] There is always a subtle tension between the chief executive officers (CEOs) and chief investment officers (CIOs) of institutions such as pension funds and mutual aid associations. This is because when CEOs attempt to make value judgments considering political factors, CIOs often counter with decisions optimized for returns. It is a healthy tension arising from their differing roles.

However, recently, this healthy tension has disappeared between the Chairperson and the Fund Director of the National Pension Service (NPS). Their seemingly united statements have shaken the capital market and the business community. It was an unprecedented event where the Chairperson, who uses ‘political language,’ and the Fund Director, who speaks in ‘numbers,’ made overlapping remarks like twins.

At the end of last year, Kim Tae-hyun, Chairperson of the National Pension Service, voluntarily held a press conference on his 100th day in office and pointed out the need to strengthen responsible investment in companies with dispersed ownership such as KT, POSCO, and financial holding companies. Later that same month, Seo Won-ju, newly appointed Fund Director of the NPS, unusually criticized the ‘self-renewal’ of CEOs of dispersed ownership companies as his first statement after taking office. The next day, when KT’s board of directors reviewed multiple candidates and selected Koo Hyun-mo as the final candidate for the next CEO, the National Pension Service expressed opposition.

The business community immediately stirred. The fact that both the Chairperson and the Fund Director consecutively voiced the same opinion was interpreted as a ‘signal’ urging incumbent CEOs of dispersed ownership companies like KT and POSCO to step down. The capital market also reacted swiftly. After the NPS’s actions, KT’s stock price plunged more than 10% within three trading days. Market capitalization evaporated by 1 trillion won in an instant. A senior official in the capital market expressed confusion, saying, "There are parts of the Fund Director’s recent remarks that are hard to understand," and added, "Take a look at the stock price and business structure changes of KT and POSCO over the past three years."

Over the past three years, KT’s stock price rose about 30%, and POSCO’s about 17%. During the same period, Samsung Electronics’ stock price fell about 5%. He added, "The current CEOs of KT and POSCO have pioneered new business areas and achieved tangible results," and frankly said, "They are doing very well." This is a cold analysis from the capital market, detached from political interests.

The recent remarks by the NPS Chairperson and Fund Director are fundamentally correct. Under normal circumstances, they could be interpreted as a willingness to actively exercise the Stewardship Code, a norm for transparent and independent fiduciary responsibility activities by the NPS. These are statements that could receive support and encouragement. However, the matching words of the Chairperson and Fund Director early in the administration should have been approached with caution, as they could be interpreted as interference and pressure on private company personnel by the NPS. If they want to actively exercise the Stewardship Code, they could send shareholder letters or officially express opposition to agenda items at shareholders’ meetings. Given the current worst conditions for corporate business and the capital market, the inaugural remarks of the ‘president of the capital market’ were widely regarded as inappropriate.

The most frequently heard comment during the selection process of the NPS Fund Director was that the NPS would prefer a ‘compliant director.’ The more difficult the economic situation, the greater the temptation for the administration. There is a temptation to politically and policy-wise mobilize the National Pension Service, which manages the public’s retirement funds expected to reach 1,000 trillion won soon. Protecting and growing the fund from the seductive whispers of temptation is the duty of the NPS Fund Director. The one who hired him is not the current administration but the future public.