National Pension Fund Management Committee Must Be More Independent

The Ministry of Health and Welfare has proposed a reform plan to include three full-time members on the National Pension Fund Management Committee. The intention is clearly to turn the Fund Management Committee into a permanent body. It is worth questioning whether creating an organization operated like a public enterprise would really help the management of the National Pension Service. There is a strong risk that it would simply expand the relevant departments and increase staffing, ultimately placing a greater burden on the public.

The Ministry of Health and Welfare says it will strengthen the expertise of the Fund Management Committee by including experts as full-time members. However, it is unclear whether full-time members can actually contribute to enhancing professionalism. On the contrary, there appears to be a greater risk that they would increase government interference in fund management. This is because the full-time members and the staff supporting their work could serve as a channel for reflecting government policy positions in the activities of the Fund Management Committee.

The direction of reform for the Fund Management Committee should prioritize strengthening its independence. If that is achieved, securing expertise will follow more easily as a secondary effect. To that end, it seems necessary to improve the system so that the Minister of Health and Welfare does not serve as chair of the Fund Management Committee. A more advanced approach would be for a professional with firsthand expertise from the financial sector to take responsibility for the committee.

It is also not desirable to compose the Fund Management Committee of representatives of employers, workers, and regional subscribers. Above all, there is a strong risk that, as with the Tripartite Commission, representatives of groups lacking genuine representativeness would clash while advancing political interests. In the end, the key to the committee’s success is whether it can create a structure in which financial experts can devote themselves fully to fund management.

The National Pension is a fund prepared for the public’s retirement. Therefore, it must be managed with stability and profitability as the top priorities. To do so, political logic must be thoroughly excluded. Management policy should be determined based on economic logic. If the fund is swayed by political slogans or reduced to a policy tool, its future can hardly be guaranteed.

Recently, the scale of Korea’s National Pension has grown to the point that it is attracting global attention. Its management standards must now secure global competitiveness to match. To achieve this, it needs to move beyond playing a monopolistic role in the domestic market and be reborn as an investor with competitive strength in global markets.

The government must never treat the National Pension as if it were its own private money. Because it assumes it can use the fund at will, government interference in pension management has grown, and side effects are appearing one after another. It is also true that there are moves to use the pension as a policy instrument to control businesses. Pressure to interfere in corporate management and to comply with government demands is being conveyed to companies through the National Pension.

In fact, the National Pension has used the Stewardship Code as a front to shake up corporate management and pursue short-term gains. The side effects of these policy experiments have reached a very serious level. The independence of the National Pension must be strengthened so that misguided policies cannot easily be reflected in its management. Doing so will revitalize the corporate economy and, ultimately, protect the public’s retirement.

Sung-no Choi, President of the Center for Free Enterprise (CFE)

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Original title: 국민연금 기금운용위원회 독립성 강화해야

Author: Sung-no Choi

Date: 2019-10-20

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&pn=24&idx=21977