FSS: Korea Investment and KB Asset Management Fall Short in Proxy Voting Disclosure

2024 Asset Management Companies' Proxy Voting Review Results
Exercise Rate at 91.6%... Dissent Rate Remains Low at 6.8%
Mirae Asset, Kyobo AXA, and Others' Proxy Voting Disclosures "Relatively Satisfactory"

The Financial Supervisory Service (FSS) has evaluated that the rate at which asset management companies exercise dissenting votes in fund proxy voting remains insufficient compared to major pension funds. Among asset management firms, Mirae Asset Asset Management, Kyobo AXA Asset Management, Truston Asset Management, and Shinyoung Asset Management were assessed as relatively satisfactory in terms of disclosure and management of proxy voting reasons. On the other hand, among the top five companies holding listed stocks, Korea Investment Trust Management and KB Asset Management were noted as needing improvement, as the rate of duplicate entries for reasons for exercising or not exercising voting rights in disclosure documents exceeded 80%.

According to the FSS on June 4, a review of proxy voting activities for public and private funds from April 2024 to March 2025 found that the voting exercise rate was 91.6%, while the dissent rate was 6.8%. This analysis was based on the proxy voting records disclosed by 273 asset management companies, covering a total of 28,969 agenda items.

Specifically, there were 24,015 agenda items approved (82.9%), 1,973 items opposed (6.8%), and 2,981 items either not voted or voted neutrally (10.3%). The FSS pointed out that although the dissent rate improved from 5.2% the previous year, it still falls short compared to the National Pension Service (20.8%) and the Government Employees Pension Service (8.9%). The FSS also emphasized that, even considering the nature of asset management companies, which sometimes must vote neutrally due to the presence of affiliates, the proportion of non-exercised votes (2,437 cases, 8.4%) remains significant.

When categorizing the agenda items on which asset management companies exercised dissenting votes, the breakdown was as follows: organizational changes such as mergers and splits (26 cases, 21.5%), amendments to articles of incorporation (286 cases, 9.0%), and appointment or dismissal of directors (789 cases, 7.9%).

Asset management companies are required to provide specific reasons for exercising or not exercising voting rights so that investors can use this information in their investment decisions. However, this review found that 72 out of 273 companies (26.7%) provided only formal statements such as "minimal impact on the general meeting of shareholders" or "no infringement of shareholder rights" for more than half of their proxy voting agenda items. For example, Company A, cited as an inadequate case by the financial authorities, did not exercise voting rights on any agenda item for all its holdings, uniformly stating reasons such as "no significant impact on fund performance."

In terms of internal policy disclosure, 57 out of 273 companies (20.9%) disclosed only basic policies that merely listed relevant regulations. Additionally, 54 companies (19.8%) failed to incorporate the amendments from the October 2023 proxy voting guidelines. Regarding compliance with the exchange’s disclosure format, 86 companies (31.5%) did not specify the agenda item titles, 62 companies (22.7%) omitted the type of agenda item, and 149 companies (54.6%) did not indicate their relationship with the target corporation, revealing numerous deficiencies.

The FSS identified Mirae Asset, Kyobo AXA, Truston, and Shinyoung as relatively satisfactory among asset management firms. Mirae Asset, for instance, had a proxy voting exercise rate of 99.3% and a dissent rate of 16.0%, both comparable to major pension funds. Kyobo AXA, despite being a small-to-medium-sized firm, operated a dedicated team and provided clear reasons for proxy voting based on internal guidelines, with a voting exercise rate of 97.4% and a dissent rate of 16.1%, also similar to major pension funds.

Conversely, among the top five companies holding listed stocks, Korea Investment and KB had duplicate entry rates for reasons for exercising or not exercising voting rights of 86.2% and 80.2%, respectively. Furthermore, a significant number of private asset management companies were found to have failed to comply with disclosure deadlines for proxy voting. Some public asset management companies were also found to have delayed or omitted disclosures.

The FSS presented three areas where improvements are needed in the proxy voting management systems of asset management companies. First, despite being large firms, some did not operate a dedicated team, instead assigning proxy voting duties to a few employees or as an additional responsibility, resulting in insufficient organizational support. Second, even in situations where managing conflicts of interest with investee companies is crucial, there were cases where firms submitted approval votes for most agenda items without specific conflict-of-interest management guidelines or disclosures. Third, some companies relied solely on the opinions of a single proxy advisory firm for all agenda items, making decisions without separate internal verification of those recommendations.

The FSS stated, "While there has been gradual improvement in the proxy voting exercise rate, numerous areas still require enhancement, including the documentation of reasons for exercising or not exercising voting rights and related management systems. As such, the current practices do not yet fully align with the intent of the Capital Markets Act, which calls for diligent exercise and disclosure of proxy voting in the interest of investors." The FSS added, "To ensure faithful fulfillment of institutional investors’ fiduciary duties, we will conduct multifaceted inspections of asset management companies’ proxy voting disclosures. We also plan to establish a comparative disclosure system for fund proxy voting to help investors identify reliable fiduciaries, and will continue to improve stewardship code practices by referencing overseas cases, making ongoing and phased efforts."