Woori Financial Group is facing criticism for not adhering to procedures, such as reporting to the board of directors during the process of deciding to acquire TONGYANG Life Insurance and ABL Life Insurance, leading to allegations of the board being a 'rubber stamp.' The Financial Supervisory Service is also viewing the matter seriously, noting that the board's role in overseeing management has not functioned properly. As the term of outside directors is set to expire, a reshuffle of the board, including the appointment of Jeong Jin-wan from Woori Bank to the board, seems inevitable.
According to the financial industry on the 10th, Jeong Chan-hyung, the chairman of Woori Financial's outside directors, is expected to step down this March after completing a six-year term. Chairman Jeong is a nominee recommended by Korea Investment & Securities among the major shareholders, and a nominee from Korea Investment is likely to follow. Additionally, outside directors Shin Yo-hwan (reappointment), Yoon In-seop (reappointment), Yoon Su-young, and Ji Seong-bae are also facing term expiration in March. Only directors Lee Eun-joo and Park Sun-young, who were appointed last year, have remaining terms.
The board members are being criticized for acting as a rubber stamp in the decision-making process regarding Woori Financial's acquisition of Tongyang and ABL Life Insurance. According to Woori Financial's internal regulations, a prior review by the Risk Management Committee is required before moving forward with mergers and acquisitions (M&A), which should be reflected in the board's decisions. However, Yim Jong-ryong, chairman of Woori Financial, set the M&A board schedule before convening the Risk Committee. Subsequently, both the Risk Committee and the board meeting were held 20 minutes apart on the day of the stock sale agreement.
Woori Financial explained that it provided sufficient explanations to individual board members regarding the M&A agenda before the board meeting. However, the Financial Supervisory Service has stated it cannot accept this explanation. In last year's regular inspection of Woori Financial, the Financial Supervisory Service analyzed the minutes of the meetings and confirmed that the board members passed the M&A agenda without substantial discussion. Even if explanations were given beforehand, the fact that the agenda was passed unanimously without an exchange of opinions among the directors at the meeting indicates that it neglected the board's role in overseeing management, according to the Financial Supervisory Service.
Since the chairman of the Financial Supervisory Service, Lee Bok-hyun, has continuously called for strengthening oversight of management by the boards of financial groups throughout his term, the Financial Supervisory Service is viewing Woori Financial's rubber stamp issue with great seriousness.
From Yim Jong-ryong's perspective, maintaining the outside directors, who have been labeled as a 'rubber stamp,' is undoubtedly burdensome. There is a need for a reshuffle of the outside directors as part of a rejuvenation effort.
However, it is difficult for Woori Financial to replace outside directors due to its governance structure. Woori Financial's outside directors are filled by nominees from major shareholders, including Korea Investment, Fubon Hyundai Life Insurance, Kiwoom Securities, and Eugene Private Equity (PE). Recently, IMM Private Equity sold all of its shares in Woori Financial, leading to the expectation that Director Ji Seong-bae, who was nominated by IMM PE, may resign. In March, two outside directors, including Chairman Jeong, can be replaced. The remaining four nominees from major shareholders cannot be replaced without consulting the shareholders.
As a result, a proposal to appoint Jeong Jin-wan as a non-executive director at the upcoming shareholders' meeting in March is being strongly discussed. A non-executive director participates in the board as a non-full-time executive officer. The position of Woori Financial's non-executive director has been vacant since the resignation of former Woori Bank CEO Lee Won-deok in March 2023. The successor, former CEO Cho Byeong-kyu, completed his term excluded from the board. Chairman Yim has maintained a solo governance system for nearly two years. Among the four major financial groups, Woori Financial is the only one where other executives, including the CEO, do not participate in the board meetings. Given the issues exposed in the management of the Woori Financial board, the necessity for the second-in-command, Chairman Jeong, to participate in the board to oversee Chairman Yim has been raised.
A financial authority official noted, "There is no legal basis for punishing or sanctioning the board members who violated Woori Financial's internal regulations," but added, "Fundamental improvements are necessary regarding the issue of outside directors acting as a rubber stamp in financial groups."