[Interview] Fostering stewardship by culture, not just by code

A decade after its introduction, the Korea Stewardship Code is set to undergo its first overhaul. The code aims to have institutional investors act as "stewards" of the companies they invest in, overseeing performance and advocating for changes. However, for the past ten years, the code has largely remained inactive. There are various aspects to consider in the upcoming revision, including whether the National Pension Service should transfer voting rights with the assets it delegates to external asset managers.

How should conflicts of interest be addressed when asset managers are linked to chaebols or financial groups? And when individual institutions lack the influence to act independently, is there a way to unite their efforts? Bruce Duguid, head of stewardship at EOS, the global asset manager Federated Hermes' specialist stewardship division, discussed these matters during an interview at EOS's London office on June 22.

EOS advises around 450-500 companies annually on behalf of institutional investors, handling 859 companies and 3,849 issues in 2025 alone. Their clients' assets total $2.4 trillion. Duguid highlighted three key insights from this interview. Firstly, the most crucial change for Korean institutional investors is a shift from merely having a code to cultivating a culture of stewardship.

While regulatory reforms and updated codes can provide a framework, the behavioral change among investors is essential for stewardship to become meaningful. Second, even companies with significant controlling shareholders, like founding families, can be engaged, but the approach must be tailored. Duguid suggests focusing on independent directors and emphasizing engagement on issues that matter to minority shareholders, such as board effectiveness, valuation impact, and cost-of-capital concerns.

He also noted that Korean regulations limiting the number of boards a director can serve on have reduced the available candidate pool, and welcomed the efforts of major Korean companies to recruit non-Korean directors despite language barriers. Lastly, Duguid believes that a collective engagement model could be effective in Korea.

Pooling investors' influence can help overcome individual limitations, and Japan's recent endorsement of collaborative engagement could serve as a model for Korea. The government and political circles are now working to revise the code and encourage more active implementation by institutional investors. According to Duguid, the single most important change needed for Korean institutional investors to engage effectively is the establishment of a genuine culture of stewardship among domestic investors.

While codes and regulations are important, the behavior of investors, supported by leading domestic funds, will determine whether stewardship becomes meaningful in practice.