NH NongHyup Life Insurance recently elected Lee Seung-geol, head of the Buk-Busan NongHyup, as a nonexecutive director. This kept the practice of appointing cooperative heads as nonexecutive directors despite a warning from financial authorities to refrain from appointing directors who lack expertise. Currently, three of NongHyup Life's four nonexecutive directors are NongHyup cooperative heads.
According to the financial sector on the 14th, NongHyup Life recently held an extraordinary shareholders meeting and appointed Lee as a nonexecutive director. The term runs through Sept. 30, 2027.
The new nonexecutive director was born in 1952 and has served as head of the Buk-Busan NongHyup since 2013. It is known that there is no insurance career at all. NongHyup Life was said to have determined that a cooperative head has insurance expertise on the grounds that its insurance products are sold at local agricultural and livestock cooperatives.
Since Kang Ho-dong, a former Gyeongnam cooperative head, took office as president of the National Agricultural Cooperative Federation, controversy over Busan–Gyeongnam-centered appointments has been constant, and this time a Busan cooperative head also secured a nonexecutive director seat at NongHyup Life.
Of NongHyup Life's four nonexecutive directors, three are all NongHyup cooperative heads, except for former NongHyup Property and Casualty Insurance Vice President Jang Eun-su. Nonexecutive directors Baek Seong-ik and Gu Sang-bong serve as heads of the Hyodon NongHyup and the Buk-Gwangju NongHyup, respectively. Former nonexecutive director Han Seung-jun also came from a cooperative head background.
Nonexecutive directors on the boards of NongHyup Financial Group and its affiliates take part in the executive recommendation committee and are involved in appointments of the chief executive officer (CEO) and executives. Nonexecutive directors who are cooperative heads are known to serve as a channel to express the federation's views during the executive appointment process. The prevailing view within NongHyup is that most nonexecutive directors at financial affiliates are close associates of the president sent down by the federation.
NongHyup Bank and NongHyup Property and Casualty Insurance, core affiliates of NongHyup Financial Group, are also continuing the practice of electing cooperative heads as nonexecutive directors. NongHyup Bank elected Kim Kwang-su, a cooperative head, in Jul., and NongHyup Property and Casualty Insurance elected Kim Jin-seok, a cooperative head, in May, as nonexecutive directors.
Financial authorities have continuously delivered warnings about this personnel practice to NongHyup Financial Group. The Financial Supervisory Service conveyed the results of its regular examination of NongHyup Financial Group and NongHyup Bank in Feb., pointing out that the personnel exchange program between the federation and NongHyup Financial Group is being poorly operated. The FSS assessed that as federation employees with insufficient financial expertise move to NongHyup Financial Group affiliates, the risks of internal control problems and financial accidents are increasing.
In 2023, the FSS also pointed out NongHyup Life's lack of insurance experience among nonexecutive directors. At the time, the FSS said, "There is a need to enhance the board's expertise by forming the board with consideration of insurance industry experience going forward," and issued a management advisory.
Despite continued warnings from financial authorities, NongHyup Financial Group affiliates are maintaining the practice of electing cooperative heads as nonexecutive directors.
A senior NongHyup official said, "It makes no sense that because a regional cooperative head was elected as federation president, the federation and even NongHyup Financial Group are exercising appointment powers," adding, "The federation president should be an honorary post, and it is right to shift to a professional management system."