On the 5th of this month, the National Pension Service (NPS) voted against the appointment of Craig Conway as an external director at the global artificial intelligence (AI) customer relationship management (CRM) company Salesforce's shareholders meeting. Earlier, on the 2nd, the NPS voted against the appointment of Stephen Burke as an external director at JPMorgan Chase, and on the 21st of last month, it voted against the appointment of Patricia Stonesifer as an external director at Amazon. The reason for the opposition was the same: their terms as directors have exceeded 20 years.
The problem is that long tenures of directors are common among industry experts abroad. There are suggestions that the NPS is applying guidelines for fiduciary responsibility activities too based on Korean standards, as it continues to increase its proportion of foreign stock holdings. Recently, the NPS also voted against the appointment of Larry Page, the founder of Google, as a director of Alphabet based on these guidelines.
◇ Whether an expert or not, the rule is to vote against long tenures
The NPS regularly discloses its overseas voting rights activities through its fund management headquarters website. Unlike Korea, where shareholder meetings are concentrated in March, many corporations in the United States hold annual meetings in May and June. This is because there are no legal regulations requiring them to hold regular meetings within three months after the end of the fiscal year like in Korea. In June alone, the NPS exercised its voting rights for JPMorgan Chase, Alphabet, ExxonMobil, Netflix, Walmart, and others.
Looking at the contents of the voting rights exercised by the NPS against major foreign investment corporations, there is a common point that it mechanically voted against long-term reappointments of directors. The NPS presents opposition voting rights on issues concerning directors who have served for more than 20 years, excessive compensation, weakening of internal audit functions, legal violations, and other concerns that may damage corporate value.
While the NPS acted according to pre-established guidelines, many corporations abroad view such decision-making as somewhat unusual. An executive from a foreign corporation stated, "In the case of overseas listed companies, if the director's expertise is outstanding and that person is not involved in immoral or illegal activities, long tenures are not questioned."
The external director of Salesforce, against whom the NPS voted this time, Craig Conway, is an information technology (IT) expert who has previously served as the CEO of PeopleSoft, an enterprise resource planning (ERP) software company, and as a vice president at Oracle. He joined the Salesforce board of directors in October 2005. Patricia Stonesifer, the external director at Amazon, has held positions as a vice president at Microsoft, chair of the board at the Smithsonian National Gallery of Art, and a director at the Rockefeller Foundation. She has been serving as a director at Amazon since 1997. All are recognized for their expertise and evaluated as having independently performed their director duties for a long time.
The NPS's mechanical exercise of voting rights, which foreign corporations do not understand, is not limited to this instance. On the 2nd of this month, the NPS also voted against the appointment of Larry Page as a director of Alphabet, the parent company of Google, due to a board attendance rate of less than 75% in the last term.
A source in the financial investment industry noted, "Just because it’s the company founder doesn’t mean you have to automatically vote in favor; however, considering Larry Page's expertise and role in establishing the current Google empire along with Sergey Brin, it’s difficult to understand how a decision can be based solely on a number (board attendance rate)."
◇ NPS continues to increase proportion of foreign stocks
The NPS Fund Management Committee recently decided to set the target proportion of foreign stocks at 38.9% by the end of next year in the approved "2026~2030 Asset Allocation Plan for the NPS Fund Management." This is an upward adjustment from the current level of 35.9% at the end of this year. The proportion of domestic stocks, currently at 14.9%, will be lowered to 14.4% by the end of next year. This indicates a continued commitment to strengthen overseas investments.
Preparation for shareholder activities targeting foreign investment corporations is also actively ongoing. Previously, in September last year, the NPS approved a plan to introduce dialogue with corporations regarding foreign stocks and recently issued a public notice to select external service agencies for shareholder activities related to foreign stocks. The NPS plans to initially focus on indirect dialogue through advisory firms until 2026 and then transition to direct dialogue.
As the 'big hand' NPS is gradually increasing its influence over foreign stocks, there are calls to refine voting rights exercise criteria to be more aligned with global standards. One source commented, "While it’s important to maintain the NPS’s fiduciary responsibility orientation, it could be beneficial to reflect a better understanding of local corporate cultures (in the regulations)."
In response, a source from the NPS Fund Management Headquarters stated, "We are continuously reviewing enhancements and improvements to voting rights criteria internally," and added, "It is difficult to specifically disclose the matters currently under review."