[2025 Audit] Lee Chanjin: "If Given Authority, Will Evaluate and Supervise 'Stewardship Code'"

On October 21, Lee Chanjin, Governor of the Financial Supervisory Service, stated, "If the Financial Services Commission delegates some of its authority regarding the evaluation of stewardship code implementation, we are willing and prepared to carry out supervisory work."

Governor Lee made this remark during the National Assembly's Political Affairs Committee audit that afternoon, in response to Assemblyman Kim Namgeun of the Democratic Party of Korea, who pointed out that, unlike in Japan and the United Kingdom, the core of stewardship code activities-implementation evaluation-is not being properly assessed or supervised in Korea.

Yonhap News

Assemblyman Kim Namgeun expressed skepticism about whether institutional investors such as the National Pension Service could properly engage in stewardship code activities in Korea. He insisted that "measures such as conducting implementation evaluations and expelling those who fail to comply are necessary." He specifically noted that in Japan and the United Kingdom, not only are such evaluations conducted, but inspections and expulsions are also implemented.

However, he pointed out the serious issue of a regulatory vacuum, stating, "When my office asked whether these evaluations are actually being conducted, the Financial Services Commission replied, 'We do not do it.' The Financial Supervisory Service said, 'It is not us, but the ESG Standards Institute.' The ESG Standards Institute responded, 'We do not conduct direct implementation evaluations, but provide various support activities.' In the end, no agency is actually carrying out this work."

In response, Governor Lee reiterated, "If the Financial Services Commission delegates some of its authority to the Financial Supervisory Service, we are willing and prepared to perform the supervisory work." He also emphasized the role of the National Pension Service. He explained, "The main concern regarding the evaluation of stewardship code implementation by institutional investors relates to the domestic equity management by the National Pension Service, which oversees many entrusted asset managers. Even without immediate legal amendments, if the Minister of Health and Welfare delegates some supervisory authority, we can exercise oversight."

He added, "By inspecting whether entrusted asset managers are implementing stewardship codes in line with ESG guidelines and determining the scope and eligibility of entrusted management based on the results, we can have a significant positive impact on the market. It could also bring about substantial changes in the culture of financial companies." He continued, "If institutional and legislative support is provided, the Financial Supervisory Service will do its utmost from our position."

During the audit, there was also criticism that the financial authorities must directly regulate leveraged buyouts (LBOs) by private equity fund (PEF) managers, as highlighted in the so-called 'Homeplus incident.' On this issue, Governor Lee stated, "Regarding LBO-type private equity funds, I have consistently raised concerns since 2015, when I served as a member of the National Pension Service Fund Management Committee, about whether it is appropriate for institutional investors to provide funding in line with ESG standards. I consider it highly inappropriate."

He further explained, "Providing funds to LBO-type private equity funds is a very serious issue. From the perspective of financial supervision, we view it with grave concern. We are preparing to significantly strengthen the management and supervision system for private equity funds, and we plan to report on this matter to the Political Affairs Committee in the future."