The conglomerate sector is expected to raise its vigilance level against a possible veto by the state-controlled pension fund during an upcoming annual general meeting of shareholders in the wake of a case at Mando Corp., a subsidiary of Halla Group.

During Mando’s shareholder meeting on Friday, the National Pension Service, the second-largest shareholder of Mando, voted against the proposal to reappoint company CEO Shin Sa-hyeon to the post for another term.

In a statement, the NPS argued that Shin undermined the company’s value and shareholders’ right as Mando offered a bailout fund worth 338 billion won ($318 million) to Halla Group’s debt-saddled construction unit last year.

Though the corporate agenda passed through the meeting as 72 percent of the attendants voted in favor of renaming Shin, who is also a vice chairman of Halla Group, the NPS veto against Mando’s CEO has drawn wide attention in the industry as the nation’s largest investor with $300 billion in assets holds a stake in a number of conglomerates, including Hyosung, Hyundai and Lotte.

A stock research analyst noted that the pension fund has cast 436 dissenting votes in a total of 2,565 corporate agendas over the past two years.

While the ratio of vetoes by the NPS at board meetings of chaebol groups stood at 5.4 percent of all votes in 2008, it climbed to 6.6 percent in 2009, 8.1 percent in 2010, 7 percent in 2011 and 18.4 percent in 2012.

“Aside from its original purpose of seeking investment gains, it seems that the NPS is aiming to expand its status as a major shareholder of major conglomerate units,” he said. “It has been more aggressive in exercising voting rights.”

A noteworthy point is that the Park Geun-hye administration included the plan to bolster the voting rights of public funds on the list of its state affairs, he said.

Market participants will being paying close attention to Hyosung Group’s shareholder meeting, slated for March 21.

Hyosung’s shareholders are scheduled to vote for or against the reappoint of group chairman Cho Suck-rai and two other chief executives including Cho’s oldest son.

Some financial consumer advocates are pressuring the NPS to veto the agenda, stressing that Cho was indicted by the prosecution for large-scale tax evasion and embezzling corporate funds.

The state fund voted against some key agendas during shareholder meetings at Sebang Group in February and Daewoo Engineering & Construction in January.

Major cases in the past include its votes against the proposals to reappoint Hyundai Motor Group chairman Chung Mong-koo to the board of directors of Hyundai Mobis and SK Group chairman Chey Tae-won to the same post of SK C&C.

Other conglomerates such as Lotte Group, CJ Group and Hyundai Group underwent similar setbacks on account of the fund.

By Kim Yon-se (kys@heraldcorp.com)