Financial Services Commission Revises Stewardship Code... Encouraging Major Investors to Join Value-Up Efforts

Discussion on the Development and Utilization of the 'Korea Value-Up Index'

The Financial Services Commission announced on the morning of the 14th that it held a 'Meeting with Institutional Investors on Corporate Value-Up Support Measures' chaired by Vice Chairman Kim So-young at the Korea Exchange located in Yeouido, Seoul. Photo by Kim So-young, Vice Chairman of the Financial Services Commission. [Image source=Yonhap News]

The financial authorities have decided to revise the Stewardship Code (Principles for Responsible Institutional Investors) guidelines to encourage institutional investors to participate in the 'Corporate Value-Up Support Plan.' The Stewardship Code is a kind of 'code of conduct' that specifies the fiduciary responsibilities of institutional investors. The Government Employees Pension Service and major domestic asset management companies also emphasized their intention to "actively participate" in order to resolve the Korea discount (undervaluation of the Korean stock market).

Meeting Held Presided Over by Vice Chairman Kim So-young

On the morning of the 14th, the Financial Services Commission announced that it held a 'Meeting with Institutional Investors on the Corporate Value-Up Support Plan' at the Korea Exchange in Yeouido, Seoul, presided over by Vice Chairman Kim So-young.

The meeting was attended by 10 institutional investors including major pension funds, asset management companies, insurance companies, and securities firms, as well as related organizations such as the Korea Exchange, Financial Supervisory Service, Korea ESG Standards Institute, and Capital Market Research Institute. The meeting discussed the incorporation of the Stewardship Code closely related to institutional investors and the development plan for the Korea Value-Up Index, which were part of the 'Corporate Value-Up Support Plan' announced on February 26.

The Stewardship Code is the 'Principles for Responsible Institutional Investors,' consisting of seven principles that institutional investors must fulfill as fiduciaries managing and operating assets on behalf of others. Institutional investors wishing to participate in the Stewardship Code publicly declare their participation and then comply with the principles. Currently, a total of 222 institutions, including the four major pension funds and 125 asset management companies, are participating.

The content related to the revision of the Stewardship Code concerns one of the seven principles: 'Principle 3: Institutional investors should periodically review investee companies to enhance their medium- to long-term value and preserve and increase the value of investment assets.' This provides a concrete basis for institutional investors to check whether investee companies are participating in the value-up program and to encourage participation if they are not.

In her opening remarks, Vice Chairman Kim said, "The government has been steadily working to resolve the Korea discount under three directions: establishing a fair and transparent market order, improving capital market accessibility, and establishing shareholder value corporate management." She explained, "When investors properly evaluate the efforts of listed companies and reflect them in investment decisions, a virtuous cycle can be created where listed companies strengthen their efforts to enhance corporate value."

Vice Chairman Kim emphasized the active role of institutional investors, stating, "Through today's revision of the Stewardship Code guidelines, a concrete basis will be established to encourage institutional investors to have investee companies participate in the value-up program."

The Financial Services Commission is currently conducting performance simulations on overseas cases and various stock selection criteria for the 'Korea Value-Up Index,' which is being developed centered on the Korea Exchange. The plan is to sufficiently consult with pension funds, asset management companies, and others during the development process so that institutional investors can actively use the index as a benchmark in the future.

Government Employees Pension Service: "Will Actively Cooperate as an Institutional Investor"

Park Hyun-sang, head of the equity management team at the Government Employees Pension Service, stated, "Since the fundamental purpose of the corporate value-up program is to improve the structure of the Korean capital market and listed companies, a policy agenda divided into long-term and short-term is necessary." He added, "We plan to actively cooperate as an institutional investor to ensure the successful establishment of the corporate value-up program."

Kim Doo-nam, managing director at Samsung Asset Management, pointed out, "Along with the incorporation of the Stewardship Code discussed today and the development of the Korea Value-Up Index, it is important to continuously discover and provide practical incentives that can induce companies to actively participate."

Hwang Sun-oh, deputy director at the Financial Supervisory Service, said, "The Financial Supervisory Service will also actively support the effective operation of the corporate value-up plan," and mentioned, "We will conduct in-depth reviews of various policy tasks for the advancement of the capital market."

Lee Hyo-seop, director at the Capital Market Research Institute, emphasized, "Looking at the Japanese case, from Abenomics in the past to the recent value-up efforts of the Tokyo Stock Exchange (encouraging participation in 'management realization considering capital costs and stock prices'), the active participation of Japanese institutional investors such as the Government Pension Investment Fund (GPIF) and the inflow of foreign capital played a significant role in the rise of the stock index."

Shim In-sook, president of the Korea ESG Standards Institute, said, "As many attendees have mentioned, the role of institutional investors is important for substantial corporate value-up, so the Korea ESG Standards Institute will also actively strive to ensure that institutional investors who have joined the Stewardship Code fulfill their roles faithfully."