NPS guidelines call for abstentions to be excluded from votes cast, but all 16 listed companies confirmed to have included them; Korea Securities Depository and NPS itself unaware of discrepancy; other pension funds face same structural problem; lawmaker calls for full audit of abstention vote handling across pension funds
Abstention votes cast by the National Pension Service at shareholder meetings have been processed in a manner that contradicts the NPS's own guidelines, an investigation has found. Under NPS rules, abstentions should be excluded from the calculation of approval rates, but every listed company examined included those abstention votes in the total shares present, effectively lowering the approval rate for each agenda item.
The NPS has disclosed its voting records since adopting the stewardship code in 2018, yet it had never verified how its abstention votes were actually being handled at the shareholder meetings where they were cast.
According to data submitted to the office of Rep. Kim Hyun-jung of the Democratic Party of Korea, a member of the National Assembly's Political Affairs Committee, by the Korea Securities Depository, the NPS abstained on agenda items at 16 listed companies — covering 16 separate resolutions — through the depository's electronic voting system between January 2024 and Sept. 28. When the depository checked with those companies on how the abstention votes had been processed, all 16 were found to have included the NPS's abstentions in the total voting rights of shareholders present, using that figure to calculate approval rates.
That practice conflicts with the NPS's own definition of an abstention. The NPS Fund Stewardship Activity Guidelines define an abstention as a vote "not counted in the number of voting rights of shareholders present." The NPS cast those votes intending to signal neither support nor opposition, but at the actual shareholder meetings the votes were folded into the shares present, working in effect to push approval rates down.
The consequences may extend beyond a simple change in the approval rate figure. On resolutions where votes for and against are closely matched, or where the outcome hovers near the threshold for passage, whether abstentions are included in the shares present could determine whether a resolution passes or fails.
The NPS abstained under the assumption that its votes would be excluded from the shares present, yet the actual structure allowed those votes to influence outcomes by depressing approval rates. The effect could be even more pronounced for special resolutions — such as mergers or spin-offs — that require a higher threshold to pass.
Conflicting abstention standards — depository only recently became aware
The discrepancy stems from conflicting standards between the NPS and listed companies. The Korea Listed Companies Association's standard shareholder meeting operating rules state that "abstention votes and invalid votes shall both be included in the number of voting rights of shareholders present" — the opposite of what the NPS guidelines prescribe.
The gap was not caught during the electronic voting process either. The Korea Securities Depository's electronic voting system simply transmits each vote cast by the NPS to the relevant company as "for," "against," or "abstain," without separately conveying the NPS's internal definition that an abstention should be excluded from the count of shares present.
The depository itself only learned of the conflict between the two standards after Kim's office raised the issue. It told her office it had "recently confirmed" the discrepancy between the NPS's internal rules and the listed companies association's standard rules — meaning even the public institution that operates the electronic voting system had been unaware of the divergence.
The NPS had similarly never checked how its abstention votes were being handled at actual shareholder meetings. In a written response submitted to Kim's office through the National Pension Service, the Ministry of Health and Welfare said that "whether an 'abstention' was counted among the shares of shareholders present at a specific shareholder meeting is a matter tallied by each company that operates the meeting, and the relevant data is not held" by the NPS.
The full picture remains incomplete. Of the 27 agenda items on which the NPS abstained between 2024 and this September, the 16 processed through the depository's electronic voting system were all confirmed to have included the abstentions in the approval-rate calculation. How the remaining 11 — cast through other electronic voting systems or by paper ballot or in-person voting — were handled has not been verified.
Among the resolutions on which the NPS abstained were items requiring high approval rates, such as corporate mergers and spin-offs. Notable examples include the 2023 merger of Celltrion and Celltrion Healthcare, the 2024 spin-offs of Hanwha, SK Networks and NCsoft, and the 2025 spin-off of Hyundai Wia. The NPS abstained on most of these to preserve its appraisal rights. All of those resolutions ultimately passed, however, so no case has been identified in which the NPS's abstention votes actually reversed a shareholder meeting outcome.
Problem extends beyond NPS — other pension funds face same structure
The problem is not confined to the NPS. Abstention votes cast by other pension funds — including the Government Employees Pension Service and the Private School Teachers' Pension — could be processed the same way under listed companies' tallying standards, prompting calls for a comprehensive review of how abstentions are handled across all pension funds.
Starting next January, listed companies with assets of 2 trillion won ($1.47 billion) or more will be required to hold electronic shareholder meetings, which is expected to significantly increase the volume of electronically cast votes. If the current structural mismatch between the effect pension funds intend when they abstain and the way those votes are actually counted at shareholder meetings persists, the same problem is likely to recur.
The Korea Securities Depository told Kim's office it would "actively communicate and consult with the Ministry of Justice, the listed companies association, and the Financial Services Commission regarding the treatment of abstention votes when calculating the number of voting rights of shareholders present."
"The NPS abstained because it had no reason to vote against, yet at the shareholder meeting that abstention has effectively functioned as a vote against," Kim said. "Neither the NPS nor the depository had properly examined a structure in which the intent of the country's largest institutional investor — managing the public's retirement funds — could be reflected in reverse."
She added that eight years had passed since the NPS adopted the stewardship code, yet it had never even confirmed how its own votes were being tallied. "The Financial Services Commission, the Ministry of Health and Welfare, and the Ministry of Justice must work together with the depository and the listed companies association to conduct a full audit of how abstention votes have been handled across all listed companies where pension funds, including the NPS, have abstained," she said.
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