Stewardship Code Must Function to Grow Companies and Protect Pensions

The "Stewardship Code" is a set of principles guiding institutional investors to act as responsible fiduciaries, managing client funds diligently by exercising voting rights and actively engaging with invested companies to enhance their value and shareholder interests. The code is designed to function through five interlocking "gears": evaluation institutions, pension funds, asset managers, service providers, and collaborative engagement groups.

South Korea's stock market suffers from weak corporate governance, and while recent amendments to the Commercial Act have laid the groundwork for reform, the Stewardship Code is seen as crucial for adding substance. The code encourages institutional investors like pension funds and asset managers to go beyond mere stock ownership and actively participate in growing the long-term value of their investments. It is intended as a self-regulatory mechanism driven by market forces, not legal compulsion.

Despite its adoption in South Korea in 2016, the code has not been revised in a decade and its implementation has been largely nominal, with no performance evaluations for its approximately 250 member institutions. As strengthening the Stewardship Code emerges as the next priority for governance reform, and with the first revision of the code approaching, the Hankyoreh is launching a series to explore the right direction. The first installment examines how the five "gears" of the Stewardship Code interlock in Europe, where the code originated.

The series will also introduce the model of Japan, which has revitalized its Stewardship Code centered around its public pension fund (GPIF) to boost corporate value. The third part will feature an expert roundtable discussing the challenges for the Stewardship Code to take root in South Korea. The article emphasizes that the effectiveness of the code hinges on the active participation and engagement of institutional investors, particularly large ones like the National Pension Service, which has faced criticism for not adequately leveraging its influence to advance the capital market.

“

The Stewardship Code is a set of principles guiding institutional investors to act as responsible fiduciaries, managing client funds diligently by exercising voting rights and actively engaging with invested companies to enhance their value and shareholder interests.