Stewardship Code

제목 [ENGLISH] Stewardship Code


 


 


Stewardship Code is the risk management strategy of Korean economy!


The draft for ‘Korea Stewardship Code’ for reinforcement of  responsible investment based on active voting right of institutional investor led by Financial Services Commission has been prepared, but currently there are currently various particular controversies such as decision of the performance-supervision subject, possibility of mutual contradiction with stock large-possession public announcement system, the regulation prohibiting use of non-disclosed information of capital market law between policy institutions, financial investment industry, and corporations.

I am convinced that, based on the monitoring experience of the Stewardship Code of UK which is introduced in 2010 as world’s first and is being executed successfully, the Stewardship Code shall go beyond financial investment industry and improve the competitiveness of all economic subjects, and become healthy nutritive material for sustainable growth of Korean economy.


Examine per economic subject.

First, in case of an institutional investor, responsible investment can be reinforced by enacting voting-right policy for investment company and disclosing the execution result and the reason. Going beyond the limits of existing investment method considering only the financial elements of an investment company, the non-financial elements are also evaluated and monitored so as to improve the investment stability based on responsible investment for sustainable growth and secure the investment reliability to domestic/foreign clients. It can be an energizer for the stagnant domestic stock market. I focus on the fact that in Japan, where the Stewardship Code has successfully made a soft-landing, GPIF (Japan public pension) first actively adopted, and effectively drawn the participation of institutional investors. Accordingly, I believe that the National Pension should take initiative in the Stewardship Code execution. This is because the responsible investment of the National Pension contributes to the risk management of the future assets of the citizens, who are the beneficiaries of the National Pension after all, and also helps out the individual who is an axis of economic subject. Also, in case the execution level of Stewardship Code is assigned as a main item in the screening evaluation for entrusted asset management company for the National Pension, active participation of institutional investors can be achieved. Also, the institutional investors who are active about the Stewardship Code can provide more specialized and professionalized corporate analysis data to the clients, thus securing distinctive competitive edge. Especially, the difficulty in corporate analysis for the target of voting-right execution with which small/medium-sized investment agency with limited human resource size can be resolved through outsourcing for voting-right consulting agency, and this can contribute to the birth of Korea’s new financial business.

Second, in case of corporations, the Stewardship Code can help sustainable growth. This is because the active monitoring and inspection for investment targets by institutional investors can lead to transparent and ethical management of companies centering on stockholders. Companies needs fund for investment activities for sustainable growth, and for smooth supply of this fund, needs to appear attractive to the investors through measures such as improving governing structure, dividend policy, etc. If the institutional investors discover an investment risk factor and request additional resources, this is an externally received signal on active necessity of risk management, and requires an active defense against such. The Stewardship Code is a risk management strategy where the company can hedge various management risks that can potentially occur. The problem of internal information leakage and management right infringement by institutional investors claimed by companies is deemed a potential risk, but it will not be a big issue if rational execution regulations are established. On the Stewardship Code execution regulation, the range of management information provided to the institutional investor should be clearly and thoroughly proposed. Also, many of the management right infringement issues can be removed if approached rationally based on the responsibilities, rights, and obligations of stockholders and presidents specified in the general stockholder meeting and the board of directors of a corporation as per the commercial law.

Third, in case of government, it enables them to promote expansion of corporate investment and vitalization of capital market in the large frame of macro-economy. This would bring a virtuous cycle to the personal economy stabilization such as reducing unemployment. The Stewardship Code is not a legally-binding compulsory provision, and the government should encourage and manage for smooth execution as institutional investor determines the subscription voluntarily. In case of UK, the actual execution power is improved through the semi-governmental organization of FRC (Financial Reporting Council). Korean government also should select a supervising agency with authority and independence, supervise execution, and notify the result. Also, it seems necessary to review the governmental incentive for the active execution. I would like to ask the relevant policy institution for a flexible review for the laws contradicting the conditions of Stewardship Code vitalization such as stock co-holder acknowledgement criteria among the existing capital market law, before a successful launch of the Stewardship Code. Risk Management Korea Company will do all our best for the Stewardship Code to be successfully introduced & carried out and become a new energy of the Korean economy.

President of Risk Management Korea
Pae Ki-Pyo (U.S.Washington State CPA & U.S.AP & Economic Critic)


Contact

ADDRESS
경기도 고양시 일산동구 중앙로 1227 동양메이저타워 2층 / Donhgyang Major-Tower 2F, Joongang-Ro 1227 Ilsan Dong-Gu, Goyang-Si, Korea
TEL
1661 -1375
EMAIL
client@risk-management.co.kr
Copyright (C) Advisory Company of Biz Risk Profiling- Risk Management Korea Co.,Ltd. All Right Reserved.