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NPS’s clout to be major at this year’s AGMs

May 22,2018
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An analysis by Chaebul.com, an online provider of information about Korea’s biggest companies, shows that the National Pension Service will inevitably play a critical role in important management decisions at annual general meetings (AGMs) this year.

Less than 50 percent of the shareholders of Korea’s top 25 conglomerates including Samsung, Hyundai Motor, SK and LG are considered management-friendly. Those blocks of shares are owned by the families that control the groups, employees or treasury stock (which has no voting rights) as of the end of March. The selection of the top 25 conglomerates are based on the 32 business groups with 10 trillion won ($9.2 billion) or more in assets that the Fair Trade Commission, an antitrust body, picked earlier this year to prohibit from using cross-shareholding to structure their ownership.

Management-friendly shareholders averaged 43.23 percent of the total. Their controlling families owned an average of 38.19 percent of the shares, followed by treasury stock at 4.37 percent and employees at 0.68 percent.

Among the remaining 56.77 percent of the shareholders who bear no direct or indirect relationship with management, foreigners accounted for 20.48 percent and the National Pension Service had 5.99 percent. Others, including minority shareholders, were 30.3 percent.

“When treasury shares with no voting rights are excluded, shares owned by the founding family members fall short of 40 percent,” said Chung Sun-sup, CEO of the information provider. “The stance of the National Pension Service [when it comes to voting] at shareholders’ meetings is critical.”

Among the top five conglomerates in order of assets, Lotte had the largest percentage of management-friendly shareholders at 57.78 percent whereas SK showed the smallest at 30.55 percent. The group in which the state-run pension fund had the largest stake among the five was LG at 8.71 percent.

The role of the National Pension Fund is set to be particularly important for Samsung and Hyundai Motor, the first- and second-largest conglomerates, both of which are embroiled in fights with Paul Singer’s activist hedge fund Elliott Management over their corporate governance. Samsung Electronics, the core unit of the country’s most valuable conglomerate, has only 17.74 percent of shares owned by management-friendly shareholders except for treasury shares. The National Pension Fund has a 9.58 percent stake in the tech giant.
BY SEO JI-EUN [seo.jieun@joongang.co.kr]