[News Terms] President Yoon Emphasizes 'Stewardship'

President Yoon Seok-yeol speaking during the major ministries' work report.
[Photo by Yonhap News]

[Asia Economy Reporter Kim Jong-hwa] 'Stewardship' means managing assets or organizations, and the 'Stewardship Code' refers to guidelines that encourage institutional investors, including pension funds, to actively participate in corporate decision-making to promote transparent management.

On the 30th, during the Financial Services Commission briefing, President Yoon Seok-yeol stated, "Companies that were formerly government-invested or public enterprises and became privatized with dispersed ownership should have what is called 'stewardship' in operation." Here, 'stewardship' appears to refer to the 'Stewardship Code.'

The 'Stewardship Code' is a set of 'codes' whereby institutional investors with significant scale, such as pension funds and asset management companies, act like stewards managing the owners' assets by actively participating in corporate decision-making, faithfully fulfilling their roles as shareholders, and transparently reporting to the owners of the entrusted funds, namely the public or clients. It is also referred to as the 'principle of fiduciary responsibility.'

Institutional investors are fiduciaries who manage investors' funds. Therefore, they have the obligation to manage these funds efficiently to ensure investors' returns. While in the past the focus was mainly on dividends or capital gains as investment outcomes, recently there has been a clear trend toward shareholder activism, which involves actively engaging in management to enhance shareholder value by holding companies accountable for insolvency, improving management transparency, and checking moral hazard.

The so-called 'Korean-style Stewardship Code introduction (draft)' adopted by the National Pension Service, which introduced the Stewardship Code in 2018, specifies seven principles: ▲establishing and disclosing fiduciary responsibility policies ▲establishing and disclosing conflict of interest prevention policies ▲continuous monitoring and supervision of investee companies ▲preparing internal guidelines for fiduciary responsibility activities ▲establishing and disclosing voting policies, and disclosing voting records and reasons ▲reporting and disclosing voting activities and fiduciary responsibility implementation activities ▲securing capabilities and expertise for effective fiduciary responsibility implementation.