South Korea's National Pension Service (NPS) has expressed disagreement with telecom giant KT Corp.'s decision on Dec. 28
to tap its current CEO Ku Hyeon-mo as the sole candidate to be its next chief.
There are growing concerns that the Korean government is ramping up its intervention in private firms' management through NPS shareholder activism.
"KT named current chief executive Ku Hyeon-mo as the sole candidate for the next CEO election on Dec. 28. This does not meet the basic principles for a CEO election, which include transparent and fair procedures to select a candidate," the NPS fund management unit said in a statement on Dec. 28.
"We will consider the matter when executing our shareholders' rights," the fund management unit added in the statement, indicating it will express opposition to Ku's consecutive term at the general shareholders meeting in March 2023.
It is the first time since its inception in 1999 that the fund management unit has openly expressed a view about a company's CEO recruitment.
The NPS statement points to the Yoon Seok-yeol administration's intent to replace CEOs who were hired during the last regime and were close to former President Moon Jae-in. Commissioned by the health and welfare ministry, the NPS can tap CEOs and CIOs after receiving approval from the government.
The statement was issued suddenly and improperly written, pension fund sources said.
Under Korea's Capital Market Act, an investor should set an investment objective of "participation in management" to influence portfolio companies' decisions regarding executive recruitment.
The NPS has set its objective of investing in KT as "simple investment," which is to earn income through stock investment but does not include the right to directly affect the company's management.
"In order to make such a statement, the NPS should have changed its investment objective after undertaking certain procedures; the pension fund has neglected that," a source said.
"KT's decision is not seen as damaging shareholder value. Under Ku's helm, KT has proactively diversified its business portfolio and its stock has increased by 90% over the past three years," another source said.
The NPS is expected to accelerate its shareholder activism, especially against companies without dominant stakeholders.
Seo Won-joo, the NPS' new chief investment officer,
said on Dec. 27 that such firms including KT, POSCO Holdings Inc. and financial holding companies need to make their CEO hiring processes more fair and transparent.
He criticized some old business practices such as giving more opportunities to in-house candidates in CEO elections and supporting CEOs in holding consecutive terms.
Write to Byeong-Hwa Ryu and Jun-Ho Cha at
hwahwa@hankyung.comJihyun Kim edited this article.
