If the government and the ruling party introduce a plan to limit a financial holding company chair's third consecutive term and elevate reappointment to a special resolution item at the shareholders meeting, cases are expected in which board-approved reappointment proposals are voted down at the meeting. Currently, because a chair's reappointment is an ordinary resolution item, there have been cases where reappointment succeeded even when performance was weak or the chair candidate was exposed to legal risk.
According to the financial sector on the 2nd, if a financial holding company chair's reappointment becomes a special resolution item, shareholders holding at least one-third of total issued shares must attend the shareholders meeting and at least two-thirds of the attending shareholders must vote in favor. Even if the board decides to reappoint the current chair, reappointment would be possible only if 67% or more of the attending shareholders approve. At present, a simple majority of those attending the meeting is sufficient.
If a chair's reappointment becomes a special resolution item, there could be cases that fail at the shareholders meeting. Former Shinhan Financial Group Chair Cho Yong-byung was embroiled in controversies during his tenure, including the Lime fund scandal and hiring irregularities. In the hiring case, the Supreme Court ultimately acquitted him, but the approval rate for his reappointment at the 2020 shareholders meeting was only 56.43%. By contrast, the approval rate for former Chair Yoon Jong-kyu's third consecutive term—credited with making KB Financial Group a "leading bank"—reached 99%.
Currently, Woori Financial Group and POSCO Holdings require a special resolution at the shareholders meeting for a chair's third consecutive term. KT also decided the appointment of a new president as a special resolution at an extraordinary shareholders meeting in 2023. The financial authorities are drawing on such cases to prepare measures to improve the process for selecting financial holding company chairs.
If a ban on a third consecutive term for chairs and special resolutions for reappointment are introduced, major changes are expected in financial holding company governance. Because boards must recommend candidates who can earn shareholders' confidence, they will need to rigorously vet candidates. They also need contingency plans in case a chair candidate's reappointment proposal is voted down at the shareholders meeting.
If reappointment becomes more difficult, the influence of foreign and institutional investors is expected to grow stronger. Most equity in domestic financial holding companies is held by institutional investors. They push for measures such as increased dividends to maximize returns.
As of the end of last month, the average foreign equity ratio across the four major financial holding companies—KB, Shinhan, Hana and Woori—was 62.89%. KB Financial was highest at 76%, followed by Hana Financial (68%), Shinhan Financial Group (60%) and Woori Financial (48%).