The number of institutional investors in Korea taking up stewardship mandate reached 100 milestone since the government introduced and encouraged the guideline to enhance participatory role of shareholders in December 2016.

According to the Korea Corporate Governance Service (KCGS) on Thursday, there were 100 institutional investors who mandated the code as of June 26, with additional 31 investors planning to adopt it. There were 35 asset management firms implementing the rules, 31 private equity funds, four insurers and four investment advisory firms.

The National Pension Service (NPS) is the only pension fund in the country compliant to the code, but Teachers Pension and Government Employees Pension Service is readying to follow suit.

Stewardship code was first introduced in Britain in 2010 to promote institutional investors’ active involvement in corporate management as stewards of shareholders’ value in companies. South Korea’s Financial Services Commission (FSC) established its own version of the code in December 2016 to enhance shareholders’ rights and promote transparent management of companies.

Financial authorities have been encouraging local institutional investors to comply with the guidelines as they have been under criticism for acting like a rubber stamp at shareholders meetings. Many investors have decided to introduce the code following the adoption of the nation’s biggest institutional investor NPS in July last year.

However, some experts and companies have issued worries about the code because it could be abused to contain companies’ management right and autonomy through excessive intervention. There are also fears about companies under more pressure to please shareholders instead of investing for future growth. Lack of expertise in the system is another concern.

Meanwhile, total 23 companies were challenged by aggressive shareholder activism by stewardship code-complaint institutional investors from January to March this year.

By Yoo Joon-ho and Choi Mira

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]