”Even in private dialogue, there is no room for improvement” - National Pension Service publicly blacklists KCC Glasses - South Korea

On the 4th, it was revealed through the Korean financial investment industry that the National Pension Service has designated KCC Glass, a major glass manufacturer, as a company under public key management.
The move stems from concerns that excessive compensation to executives belonging to controlling families is infringing on shareholder rights.
The National Pension Service has decided to participate in the Value Up Program, which is being promoted by the Korean government with the aim of increasing corporate value, and the market is expecting that the National Pension Service will acquire KCC Glass.
The view that the company will actively exercise its shareholder rights is growing. On the 2nd, the National Pension Service notified KCC Glass that it had been selected as a publicly-listed company under priority management.
The companies to be included are portfolio companies that the National Pension Service believes may have a negative impact on the fund's profitability. The National Pension Service is the major shareholder of KCC Glass, with a 7.10% stake.
It is said that the government took this measure after attempting closed-door dialogue last year but seeing no improvement in the priority management issues.
The National Pension Service has been gradually taking measures against priority management issues such as insufficient dividends and excessive compensation for directors.
The company is taking a step-by-step approach to shareholder action. It selects companies through private dialogue and then decides whether to designate them as privately-controlled companies. If no improvement is seen, it will be moved to publicly-controlled companies.
The National Pension Service will take more public actions, such as exercising voting rights at shareholders' meetings and sending letters. In March 2022, the National Pension Service will select companies under public management, with Namseong Aluminum being the last one.
This is the first time in two years that a company has been designated as a publicly-listed company. A National Pension Service official said, "We will make the most of private dialogue (to cushion the market shock) and communicate the results of improvements by checking the implementation of the measures."
KCC Glass has been trying to hold dialogue for four or five years, not just last year, but has not made sufficient efforts to improve internally.
The background to the National Pension Service's concern is the excessive limit on director compensation. In 2022, KCC Glass paid 83% of the total compensation paid to its five registered directors to Chung Mo-yeon.
In addition, at this year's general shareholders' meeting, KCC Glass proposed setting a 6 billion won limit on director compensation.
The Institute for Good Corporate Governance Structures recommended opposition to the plan, citing "excessive compensation for controlling shareholders and the absence of an independent compensation review mechanism."
The report also pointed out that the payout ratio was 86.9%, with Chairman Chung Mong-ik accounting for 66.2% of the total. It also said that the pay gap between Chairman Chung and the next-highest professional manager was 6.
In response, the National Pension Service has questioned the appropriateness of executive compensation and has been engaged in closed dialogue for over two years.
Some in the financial investment industry have suggested that the promotion of a corporate value-up program aimed at protecting shareholder interests influenced this decision.
This is because the government has been promoting the Value Up Program, and the strengthening of the Stewardship Code for institutional investors has been emphasized.
However, as the decision to go public was made after several years of closed-door discussions, it is unclear whether the move is directly related to the political "value-up policy."
There are also counterarguments that a direct connection is impossible.