Purpose of the Code

The Korea Stewardship Code, the “Principles on the Stewardship Responsibilities of Institutional Investors”, sets forth seven detailed principles and guidelines that institutional investors holding the shares of publicly listed companies in Korea should follow to fulfill their fiduciary duties as a steward taking care of and managing the assets entrusted by others. Institutional investors should discharge their fiduciary responsibilities faithfully through the shareholder activities such as monitoring investee companies and actively engaging in a dialogue with them if a concern is identified. These activities can not only induce mid- and long-term growth of investee companies and contribute to higher returns for their clients and beneficiaries, but also support the growth and development of the capital markets and the overall economy.

Korea Stewardship Code Seven Principles & Guidance Institutional investors fulfill fiduciary responsibilities
  • 01Enhance mid- and long-term corporate value of investee companies and ensure their sustained growth
  • 02Promote mid- and long-term interests of clients and beneficiaries
  • 03Support the healthy growth and development of the Korean capital markets and the economy as a overall economy.

Seven Principles

The Korea Stewardship Code sets forth the following seven principles as a soft law:

  • Principle 1Institutional investors, as a steward of assets entrusted by their clients, beneficiaries, etc., to take care of and manage, should formulate and publicly disclose a clear policy to faithfully implement their responsibilities
  • Principle 2Institutional investors should formulate and publicly disclose an effective and clear policy as to how to resolve actual or potential problems arising from conflicts of interest in the course of their stewardship activities.
  • Principle 3Institutional investors should regularly monitor investee companies in order to enhance investee companies’ mid- to long-term value and thereby protect and raise their investment value.
  • Principle 4 While institutional investors should aim to form a consensus with investee companies, where necessary, they should formulate internal guidelines on the timeline, procedures, and methods for stewardship activities.
  • Principle 5Institutional investors should formulate and publicly disclose a voting policy that includes guidelines, procedures, and detailed standards for exercising votes in a faithful manner, and publicly disclose voting records and the reasons for each vote so as to allow the verification of the appropriateness of their voting activities.
  • Principle 6Institutional investors should regularly report their voting and stewardship activities to their clients or beneficiaries.
  • Principle 7Institutional investors should have the capabilities and expertise required to implement stewardship responsibilities in an active and effective manner.
Korea Stewardship Code

Comply or Explain

Pension FundsInsurance companiesOther Institutional InvestorAdvisory FirmsBanksAsset Management Firm
Target Institutions

The Code only applies to the institutions who have explicitly declared participation in the Principles, including institutional investors such as asset management companies, insurers, and pension funds, and proxy advisors and investment advisory firms helping their shareholder engagement.

Approach to Code Compliance
Comply or Explain

It is desirable that institutional investors who are participating in the “Principles” implement all the 7 detailed principles and guidelines. If any principle is not implemented in an exceptional case, the reason and an alternative should be sufficiently explained and disclosed.

KCGS
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