Outside directors of the four major financial holding companies, including KB, Shinhan, Hana, and Woori, worked an average of 404 hours last year and received about 77 million won in compensation. They cast a dissenting vote only once during board and committee meetings last year. This continuous criticism points to the high-salaried outside directors becoming mere 'rubber stamps' for the management.
According to the '2024 annual report on governance and compensation system' disclosed by each company on the 7th, the four major financial holding companies paid a total of 2.468685 trillion won in compensation to 32 outside directors last year. The average compensation per person was 77.15 million won. The company with the highest average annual salary for outside directors among the four major financial firms was KB Financial at 92.32 million won, followed by Shinhan Financial at 78.04 million won, Hana Financial at 70.72 million won, and Woori Financial at 69.07 million won.
The annual salary of Kwon Sun-joo, former chairperson of the KB Financial Board, who resigned due to term expiration earlier this year, was 100.66 million won, the highest among the outside directors of the four major financial companies. Kwon was the first woman to serve as a bank president in South Korea at IBK Industrial Bank. The annual salary of Jeong Chan-hyung, former chairperson of the Woori Financial Board, who served as an outside director for six years from the launch of Woori Financial until last year, was 94.5 million won, following Kwon. Yoon Jae-won, a professor at Hongik University and former chairperson of the Shinhan Financial Board, and Lee Jeong-won, former CEO of Shinhan DS, received 92.1 million won and 89.17 million won, respectively, last year.
Outside directors receive a basic salary of around 4 to 5 million won per month and receive additional allowances when attending board or committee meetings. For attending a board meeting, they receive 1 million won, and for attending a committee meeting, they receive 500,000 won. The board chairperson received a monthly allowance of 1 million won, and the commissioner received a monthly allowance of 500,000 won. All four major financial firms provided benefits such as chauffeur-driven cars for attending meetings and annual health checkups to outside directors. Only Jeong Seong-bae, CEO of IMM Investment, who holds the position as an agent of a major shareholder, did not receive compensation according to internal regulations.
Last year, outside directors of the four major financial companies worked an average of 404 hours per person. If calculated hourly based on their salaries, it amounts to approximately 190,000 won per hour. The working hours included time spent attending board meetings and reviewing agenda items before the meetings. Among them, outside directors of Shinhan Financial had the highest average working hours at 435 hours, followed by KB Financial at 429 hours, Woori Financial at 406 hours, and Hana Financial at 346 hours.
It is questionable whether outside directors, who receive substantial annual salaries relative to their working hours, adequately oversee management such as the chairperson of the holding company. The four major financial companies held a total of 54 board meetings last year, but there were no instances of dissenting votes on agenda items. There was only one instance of a dissenting opinion during committee meetings. Yoon In-jae, a former outside director of Shinhan Financial, cast a dissenting vote during the compensation committee meeting in February regarding the evaluation of the group's chief executive officer and subsidiary performance. However, the agenda was approved with three votes in favor out of four.
There were frequent occurrences of 'passing' the board. Woori Financial held the listing committee and board meetings 20 minutes apart on the day of the stock purchase agreement for the acquisition of Tongyang Life and ABL Life Insurance in August last year, and received criticism from the Financial Supervisory Service for not incorporating the risk committee's deliberations into the board agenda. It was also found that the contract clause that forfeits the deposit in case of failure of M&A approval was not discussed at the board meeting. During that meeting, Woori Financial's chairperson Im Jong-ryong and seven outside directors all voted in favor of the life insurance M&A merger decision.
A senior official from the financial holding company noted, "Because the structure involves explaining agenda items directly to outside directors or holding pre-meetings to exchange views before the board meeting, it’s a system where dissenting votes cannot occur in the board. Therefore, it cannot be considered passing since the outside directors are not unaware of the contents just because there were no discussions about the agenda on the day of the board meeting."
In response to such claims, Professor Seong Soo-yong of the Korea Financial Research Institute remarked, "The issue is that there is no record of what opinions outside directors presented in the pre-explanations or meetings, including whether they expressed any opposition. This makes it difficult to ascertain whether they fulfilled their duty of loyalty, and even if problems arise, it’s challenging to hold them accountable for management responsibilities."