11 - Korea’s Stewardship Code and the Rise of Shareholder Activism

Summary

The Korean Stewardship Code is remarkably similar to the UK Code in terms of language, although it differs significantly in motivation. A major concern in the UK is institutional investorsʼ dormancy in widely held shareholding. Conversely, a primary purpose of stewardship in Korea is to keep controlling shareholders in check, particularly by curbing tunnelling of controlling family members. This chapter elucidates contents, the enforcement mechanism, the features, impacts and implications of stewardship in Korea and its related shareholder activism. A unique feature in Korea is the National Pension Service (NPS), the largest institutional investor in Korea and the worldʼs third largest public pension fund. As a keen advocate of shareholder activism, the NPS acts as a catalyst in spreading stewardship in Korea. However, since it is a quasi-government agency, the concern is that its investee companiesʼ autonomy may be damaged in the name of stewardship. Another concern is that the government may use stewardship as a powerful policy tool to steer the private sector in line with its own socio-political agenda that has less to do with the financial benefits of the NPS’s beneficiaries.