Former HDC Hyundai Development Company CEO Chung Mong-gyu

By Lee Kyung-min

A coalition of labor and civic groups are calling on the National Pension Service (NPS) to file a shareholder derivative lawsuit against three major scandal-tainted companies on behalf of minority shareholders. The labor and civic groups view the lawsuits as due course for seeking greater accountability for CEOs to keep corporate misbehavior in check.

A shareholder derivative lawsuit is filed by a group of individual shareholders against firm heads and the board of directors for wrongful acts or doing harm to the interests of minority shareholders.

Kakao founder Kim Beom-su

The coalition says the role of the state-run pension fund should be expanded for greater and fair representation of small investors with little to no way of seeking legal remedy in the case of a sudden dive in share prices brought on by management taking risks. Top managerial figures including CEOs almost always emerge from scandals unscathed, unlike small shareholders who often incur substantial losses, it added.

Also propelling the collective move is a recent government move to allow small NPS subscribers to exert greater influence in the makeup of the state pension's subcommittees that will hold exclusive discretion in bringing forward politically charged suits, a much-dreaded scenario for large firms.

Shinsegae Group Vice Chairman Chung Yong-jin

Among the three scandal-tainted firms are HDC Hyundai Development Company, the supervisor of the construction of an apartment complex in Gwangju where seven casualties occurred after a portion of a building collapsed.

Kakao Pay, the financial subsidiary of Kakao Corp., the country's IT giant, drew public fury over about 90 billion won ($74 million) in short-term, windfall gains netted by its top managerial figures at the expense of retail shareholders. Former Kakao Pay CEO Ryu Young-joon and seven others sold off their stocks less than a month after the firm went public.

The third is Emart, de-facto controlled and managed by Shinsegae Group Vice Chairman Chung Yong-jin, the largest shareholder of the retailer with an 18.56 percent stake. Anti-communist remarks posted by the eccentric businessman on his social networking service account prompted declines in the share prices of Shinsegae and Emart. He used the term "Myulgong," meaning to annihilate communism in Korean.

Greater accountability

People's Solidarity for Participatory Democracy (PSPD), Public Pension for All (PPA), and Korea's two umbrella unions ― Korean Confederation of Trade Unions and Federation of Korean Trade Unions ― said the corporate values of the three firms plunged due to a failure of the company boards in their duty to fulfill monitoring responsibilities.

"HDC's poor construction led to fatal accidents and share prices of Kakao and Kakao Pay dropped sharply due to a lack of ethics and morals of the firm's executives. Emart is being boycotted due to irresponsible remarks by Chung," they said during a press conference in front of NPS headquarters in Seodaemun, northwestern Seoul, Jan. 24. "We demand a dismissal of board members at the three firms, and measures to prevent the recurrence of share price plunges."

Korea implemented the stewardship code, a principle to be observed by entities that manage assets on behalf of institutional shareholders to ensure responsible investment, in 2018. But no responsible activity has since followed, they added.

"An immense loss of pension fund is inevitable without prompt corporate structure overhaul. The state-run pension fund should bring a shareholder derivative suit against the three for incurring serious losses to the funds that could directly impact the lives of many senior citizens post-retirement."

NPS officials were unavailable for comment.