The Democratic Labor Institute released a report on the 29th calling for the suspension of the National Pension Service's voting rights privatization plan. Hong Seok-hwan, policy director at the institute, criticized the government's proposal to transfer voting rights from the National Pension Service to asset managers, arguing it creates structural conflicts of interest that could undermine labor rights. The criticism follows the government's March report to the Fund Management Committee outlining plans to shift domestic equity management from an investment mandate structure—where asset managers handle trading while the pension fund retains voting rights—to a standalone fund structure that transfers both stock ownership and voting rights to asset managers.
Democratic Labor Institute Opposes Voting Rights Transfer to Asset Managers
Hong stated in the report titled 'Improvement Tasks for ESG Guidelines, Stewardship Code, and National Pension Fiduciary Responsibility Implementation Review System from a Labor Perspective' that the voting rights privatization plan should not proceed. "This represents the privatization of shareholder rights, abandoning the National Pension Service's role as a public asset entrusted with citizens' retirement funds and as a public supervisor of capital markets, and handing it over to financial capital pursuing private profit," Hong said.
The policy director explained that most large domestic asset managers set to receive voting rights are either chaebol affiliates or belong to financial holding companies. "They depend on B2B revenues such as corporate pension management, corporate bonds, and IPOs from large corporations," Hong said. "Amid structural conflicts of interest, it is difficult for them to cast opposition votes, such as opposing the reappointment of large corporate owners who are their largest clients."
Hong called for strengthening the status and professional personnel of the fiduciary responsibility organization within the National Pension Service Fund Management Headquarters instead of proceeding with privatization.
Report Warns Shareholder-First Policies May Pressure Labor Rights
The report also criticized South Korea's ESG framework for being concentrated on environmental (E) and governance (G) aspects while neglecting social (S) dimensions, particularly labor rights. "The capital market activation and advancement being strongly pursued by the Lee Jae-myung government is biased toward shareholder priority," Hong argued. "There are concerns that basic labor rights may be violated."
Hong warned that if boards of directors are pressured to prioritize short-term shareholder profits over the rights of various stakeholders including workers, subcontractors, and local communities, demands for short-term stock price support, high dividends, and treasury stock cancellation will intensify. "The risk also increases that activist funds will use breach of trust lawsuits as leverage to force workforce restructuring, business unit sales, and outsourcing," he added.
The report cited the MBK Partners and Homeplus case as a representative example of such negative consequences.
Institute Recommends Mandatory Labor Disclosure in ESG Framework
Regarding the mandatory disclosure set to take effect in 2028, Hong noted that it is concentrated on climate (E) issues. "Social (S) and labor disclosures must be incorporated as mandatory items," he argued.
The report also addressed the government's 'Stewardship Code Substantiation Plan' announced in December of last year. "During this year's revision process, the obligation to publicly disclose implementation review results was weakened. Behind-closed-doors reviews cannot produce market self-correction effects," Hong said. He called for strictly limiting exception explanation requirements "to block formal participation that habitually neglects involvement in labor and safety issues."
FAQ
What did the Democratic Labor Institute recommend regarding National Pension Service voting rights?
The Democratic Labor Institute called for suspending the National Pension Service's plan to transfer voting rights to asset managers. The institute's report argued that this privatization would create structural conflicts of interest, as most large domestic asset managers are chaebol affiliates or financial holding company subsidiaries that depend on revenues from large corporations, making it difficult for them to cast opposition votes against corporate owners.
Why does the report criticize the government's capital market policies?
The report states that the capital market activation and advancement policies are biased toward shareholder priority, creating concerns about labor rights violations. Hong Seok-hwan warned that pressuring boards to prioritize short-term shareholder profits could intensify demands for workforce restructuring, business unit sales, and outsourcing, citing the MBK Partners and Homeplus case as an example of potential negative consequences.
What changes to ESG disclosure does the institute propose?
The institute recommends incorporating social (S) and labor disclosures as mandatory items in the ESG framework, noting that the mandatory disclosure set to take effect in 2028 is concentrated on climate issues. The report also calls for strengthening public disclosure requirements in the Stewardship Code implementation review process and strictly limiting exceptions to prevent formal participation that neglects labor and safety issues.
