The National Pension Service (NPS) has changed the purpose of its shareholding in Samsung Biologics (207940) from “simple investment” to “general investment,” drawing keen attention to whether South Korea’s largest institutional investor will aggressively push for expanded dividends and stronger shareholder rights. Analysts view the decision as a potential critical inflection point for the company’s shareholder return policy, given Samsung Biologics’ long-standing no-dividend stance since its founding.
According to the Financial Supervisory Service’s electronic disclosure system on the 5th, the NPS changed the purpose of its Samsung Biologics stake on the 29th of last month. The NPS had initially held the shares for general investment purposes but switched to simple investment in March 2024, only to revert to general investment after two years and four months. During the same period, the NPS’s stake in Samsung Biologics rose by 0.2 percentage points from 6.68% to 6.88%.
When the NPS holds more than 5% of a listed company’s shares, it must disclose the status and purpose of its holdings. The holding purpose is broadly categorized into management participation, simple investment, and general investment. Management participation means directly or indirectly exerting influence over corporate control, while simple investment is a passive approach involving only voting rights on agenda items at shareholder meetings without influencing management control.
In contrast, general investment allows for more active shareholder engagement within boundaries that do not constitute management participation, including proposing dividends, opposing director appointments, amending articles of incorporation, and requesting the dismissal of executives for illegal activities. An NPS official explained, “We typically change the holding purpose through a formal decision-making process indicating we will no longer pursue simple investment. Switching to general investment enables us to make shareholder proposals, such as on dividends, and engage in private dialogue with the company, as long as it does not amount to management participation.”
Samsung Biologics has never paid a single dividend to shareholders since its founding in 2011. Earlier this year, the company decided against dividends, citing large-scale production facility investments, and stated it would provide a dividend policy update in three years. However, as Samsung Biologics posted consolidated revenue of 2.58 trillion won (approximately $1.8 billion) and an operating profit of 1.17 trillion won (approximately $816.6 million) in the first half alone—making annual revenue of 5 trillion won (approximately $3.5 billion) highly likely—some shareholders have voiced feelings of alienation.
Samsung Biologics is currently engaged in labor-management wage negotiations, with a host of issues to be resolved among shareholders, management, and employees. Against this backdrop, the NPS’s change in investment purpose is seen by some as a preliminary move to represent shareholder interests. A Samsung Biologics official declined to comment, saying, “It is difficult for us to comment on the NPS’s change in investment purpose.”
The potential impact of the NPS’s move can be gauged by past cases involving Hanmi Pharmaceutical (128940) and Daewoong Pharmaceutical. The NPS changed its holding purpose in Hanmi Pharmaceutical from simple investment to general investment in August 2024. At the time, Hanmi Pharmaceutical was embroiled in a management dispute between the founding family’s siblings and a mother-daughter faction. At an extraordinary shareholder meeting that December, the sibling faction proposed dismissing former CEO Park Jae-hyun and Hanyang Precision Chairman Shin Dong-kook from the board.
The NPS opposed the proposal, stating “the grounds for dismissal are insufficient,” and the motion was ultimately rejected. After the management dispute began winding down, the NPS reverted its holding purpose back to simple investment in March of this year. Shortly after, Hanmi Pharmaceutical proposed appointing former lawmaker Chae Yi-bae as an outside director at its shareholder meeting, but the NPS opposed it, citing unconfirmed employment approval from the Public Official Ethics Committee. Despite the NPS’s opposition, the motion passed with 80.6% approval. As of June, the NPS held a 10.3% stake in Hanmi Pharmaceutical.
The NPS’s streak of “opposition” continued at Daewoong Pharmaceutical’s shareholder meeting. In March of this year, Daewoong Pharmaceutical proposed an amendment to its articles of incorporation stating that “treasury shares may be held and disposed of in accordance with the Commercial Act when necessary to achieve the company’s management objectives.” The NPS voted against it, stating, “Given the company’s shareholding structure, a treasury share disposal plan could be approved at a shareholder meeting with only the largest shareholder’s approval, and no measures to reflect the opinions of other general shareholders were identified.” However, the motion passed with 86.7% approval. As of last month, the NPS held a 10.1% stake in Daewoong Pharmaceutical.
Retail investors generally welcome institutional investors like the NPS actively voicing their opinions to companies, as the NPS’s strengthened shareholder activism is likely to lead to shareholder-friendly policies such as expanded dividends or treasury share cancellations. On the other hand, companies remain on edge. Even if the NPS’s intervention does not lead to direct management interference, it effectively holds a casting vote on key agenda items such as treasury share cancellations or amendments to articles of incorporation.
A pharmaceutical industry official said, “The NPS is scrutinizing shareholder meeting agendas rigorously and opposing many of them. An environment is being created where companies inevitably have to pay more attention to enhancing shareholder value.”