The Stewardship Code is a set of principles stating that institutional investors should assess the value of their investee companies and encourage those companies to take responsibility for their sustainable growth. Rather than simply holding shares in a company, institutional investors are expected to actively engage in corporate management and fulfill their responsibilities as shareholders. The Stewardship Code functions more as a code of conduct — guiding institutional investors to actively exercise their shareholder rights as a check on companies that may be at risk of undermining shareholder value. In practice, this means monitoring the management activities of investee companies, offering opinions when necessary, and publicly disclosing both the process and its outcomes — thereby strengthening trust between investors and companies and co-creating long-term corporate value.
First introduced in South Korea in 2016, the Stewardship Code began attracting significant attention when the National Pension Service (NPS) adopted it in 2018. Just as a "steward" manages the household of their employer, institutional investors such as the NPS need the Stewardship Code to protect, grow, and properly manage the assets of their beneficiaries.
[Stewardship Code ⓒESG.ONL]
Above all, the core of the Stewardship Code is in the exercise of shareholder rights — a form of active engagement in corporate management. Institutional investors are now empowered to exercise their shareholder rights actively against companies that may cause harm to public assets. For instance, the NPS, acting as an institutional investor, has voted against the reappointment of the CEO of a major conglomerate where management failure was a concern, resulting in the executive stepping down. Based on such cases, business groups have raised concerns that the application of the Stewardship Code could infringe on management autonomy — making balanced operation to ensure the code's practical effectiveness an important ongoing challenge.
The rising prominence of the Stewardship Code reflects growing demands for capital market advancement, improved corporate value, and stronger substantive accountability from institutional investors. The Financial Services Commission announced that, consistent with the code's founding principles in 2016, it will pursue measures to revamp the Stewardship Code going forward — including strengthening actual compliance among institutional investors who had previously joined in name only — to enhance the effectiveness of the system.
by Editor O