President Lee Jae-myung criticized the practice of a bank president becoming the head of a financial holding company and that head serving consecutive terms as a "corrupt inner circle," while referring to the governance structures of financial firms. The president and the financial authorities see financial holding company chairpersons as filling their boards with "their own people," making it easy to extend their terms.
The chairman recommendation committee (chairman recommendation committee), which decides whether a financial holding company chair serves another term, is usually composed mainly of outside directors, and because outside directors are appointed by current management, the committee tends to be filled with figures friendly to current management. When a new chair takes office at a financial holding company, the composition of outside directors is also largely changed.
Under the leadership of Chair Yang Jong-hee, who took office at KB Financial Group in Nov. 2023, four of the seven outside directors were replaced. At Shinhan Financial Group, after Chair Jin Ok-dong took office in Mar. 2023, four of nine outside directors changed; at Hana Financial Group, after Chair Ham Young-joo took office in Mar. 2022, six of nine changed. At Woori Financial Group, after Chair Yim Jong-ryong took office in Mar. 2023, six of seven outside directors were replaced.
In the financial sector, criticism has persisted that, after taking office, financial holding company chairs replace large numbers of outside directors to build boards composed of their own allies. Financial Supervisory Service Governor Lee Chan-jin said at a National Assembly audit in Oct., "When someone becomes the chair of a financial holding company, they fill the board with their own people and build a kind of trench."
The four major financial holding companies paid a total of 2.46865 billion won in compensation last year to 32 outside directors. The average per person was 77.15 million won. The highest average annual pay for outside directors was at KB Financial at 92.32 million won, followed by Shinhan Financial Group (78.04 million won), Hana Financial (70.72 million won), and Woori Financial (69.07 million won).
Outside directors receive about 4 million to 5 million won per month as base pay, and they receive additional allowances for attending board or committee meetings. They are paid 1 million won for attending a board meeting and 500,000 won for attending a committee meeting. The board chair received 1 million won per month and the Chairperson received 500,000 won per month as a position allowance, respectively. All four major financial groups provided chauffeured vehicles for outside directors when attending meetings and benefits such as an annual health checkup.
Cases of outside directors voting against agenda items submitted by management are rare. The four major financial holding companies held a total of 54 board meetings last year, and there was not a single opposing vote. A financial industry official said, "There are no opposing votes because efforts are made to persuade the board before an item is brought to it."
At a Financial Services Commission (FSC) briefing on the 19th regarding the selection of financial holding company chief executive officers (CEOs), the president said, "These days, we are getting a flood of anonymous reports. It seems (key figures) serve as chair, then bank president, and go back and forth for 10 or 20 years," adding, "When left alone, a corrupt inner circle forms, and a small number take turns doing as they please and exercising control."
Lee Han-sang, a business professor at Korea University, said, "At the chairman recommendation committee level, there needs to be an effort to rigorously vet (chair) candidates' qualifications through advice from outside institutions with expertise."