SEOUL (Reuters) – Elliott Management received a potentially fatal blow in its proxy fight to shake up South Korea’s Hyundai Motor Group on Thursday when major shareholder the National Pension Service (NPS) said it would vote down the U.S. hedge fund’s proposals.

Elliott, founded by billionaire Paul Singer, has been battling to get South Korea’s No.2 conglomerate to return excess capital to shareholders and fix governance problems since May last year when it scuppered a restructuring plan. [L4N1RG5BG]

The fund has demanded 7 trillion won ($6.2 billion) in one-off dividend payments and seats on the boards of group companies Hyundai Motor and Hyundai Mobis, in proposals to be put to a shareholder vote on March 22. Hyundai has rejected the proposals.

The NPS holds swing votes in the proxy contest because it is the second-biggest shareholder of Hyundai Motor and Hyundai Mobis, with stakes of 8.7 percent and 9.45 percent respectively.

In a statement it said Elliott’s dividend proposals were “excessive” and it would oppose the U.S. fund’s director nominees because of “conflicts of interest”.

The NPS vote decision was made at a meeting of its panel of outside experts, after South Korea’s leading proxy advisor, KCGS, recommended shareholders vote against Elliott’s proposals.

Global proxy advisory firm International Shareholder Services has recommended that Hyundai investors elect some directors nominated by Elliott, while urging votes against the U.S. investor’s dividend proposals.

Hyundai Motor and Hyundai Mobis shares lost ground, falling 4.1 percent and 3.6 percent respectively on Wednesday afternoon while the broader market was flat.

“Chances of higher dividends have gone for now,” Nomura analyst Angela Hong said.

“As the NPS opposes Elliott plans, there is no way Elliott will be able to push for its proposals.”

Elliott was not immediately available for comment.

Hyundai Motor Group said the pension fund’s decision would “support our company’s future sustainable growth”.

The group has said Elliott’s call for higher payouts would limit its ability to invest in acquisitions and technology such as autonomous vehicles.

The U.S. fund however says that even after the payout, Hyundai’s net cash level will be in line with industry peers. Elliott has also raised concerns that Hyundai’s excess capital will be used to fund non-core projects, citing the group’s $10 billion investment in land for its headquarters in 2014.

Shareholder activism is growing in South Korea after President Moon Jae-in made reform of the country’s powerful conglomerates a key election pledge.

Calls for the country’s family-run business empires to become more accountable increased in the wake of a corruption scandal involving Moon’s impeached predecessor and Samsung Group.

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