Shareholder Activism in Korea: The Cases of PSPD and NPS

Abstract

This paper aims to review and analyze shareholder activism in Korea over the past two decades by focusing on the activities of the People’s Solidarity for Participatory Democracy (PSPD) and the National Pension Service (NPS). PSPD, a non-governmental organization founded in 1994 under the strong influence of the democratization movement and the “public interest law” movement, played a crucial role in the shareholder activism. Its activism invoked various minority shareholders’ rights that had remained dormant for decades, and increased the transparency of the corporate decision making process in large Korean companies. However, because of its sociopolitical motive, it targeted large and famous companies which were ironically had relatively better corporate governance. The brilliant but short tale of PSPD left questions regarding the sustainability and efficiency of shareholder activism when it is sociopolitically motivated. After 2010, NPS, which owns about 8% of the total market capital of Korean stock market, is becoming more inclined towards shareholder activism. Through a few episodes, this paper shows that the NPS may have an incentive for shareholder activism, but only in a very limited manner. More serious concerns are raised about the independence of the NPS, which is vulnerable to demands from the government and politicians. The NPS must find inspiration in PSPD’s enthusiasm in pursuing their goals and their creativity in taking legal actions, but the NPS also needs to be careful not to allow political motives to influence its exercise of shareholder power.