Yang Jong-hee, the current KB Financial Group(105560) group chairman, failed to win another term against market expectations, drawing attention to the moves of KB Financial Group outside directors, who have selected unconventional choices rather than leading candidates whenever choosing a chair. KB Financial Group's board is known to have the strongest independence among the four major financial holding companies.
In the financial sector, some voiced concern about the power of KB Financial Group's outside directors, who replaced a sitting chair with clear results. The KB Financial Group chairman candidate recommendation committee (the committee) is made up of seven outside directors.
According to the financial sector on the 14th, the KB Financial Group committee is said to have acknowledged Chair Yang's performance during the term but judged that he fell short in presenting a mid- to long-term vision. However, many in the financial sector say this alone does not sufficiently explain why Yang, who has clear management results, failed to win another term.
Yang was seen as likely to be reappointed after being recognized for record-high earnings, strengthening of the nonbanking portfolio, and expanded shareholder returns. There were no issues that could be deemed disqualifying, such as sanctions by the financial authorities. As the KB Financial Group committee named Lee, the institutional sector head, as the next chair, it said, "It is time for bold change and a generational shift to strengthen the group's fundamental competitiveness and secure future growth engines, rather than staying with the current strong results."
Outside directors Cho Hwa-jun, Yeo Jeong-seong, and Kim Seong-yong, who took part in this committee, had also served on the committee that selected Yang in 2023. Even then, many in the financial sector viewed Vice Chair Heo In of KB Financial Group as the front-runner over Yang. Factors included Heo being one year behind Yoon Suk-yeol at Seoul National University's law school and his solid standing within the group. However, the committee is said to have unanimously chosen Yang.
There have also been cases in which mergers and acquisitions (M&A) plans were scrapped due to opposition from outside directors. In 2011, then-Chair Eo Yoon-dae pushed to acquire the Korea unit of ING Life Insurance, but outside directors voted against it at the board, and the M&A fell through. In March the following year, the board also removed Park Dong-chang, then an executive vice president and a closest aide to former Chair Eo, from his post after relations soured over the ING Life deal. ING Life was later acquired by Shinhan Financial Group at a higher price than what KB Financial Group had offered.
In the financial sector, some say KB Financial Group, which had long been buffeted by outside interference in the past, secured the independence of its outside directors through sustained efforts. Still, there are also voices of concern about outside directors wielding the power to replace even a sitting chair with clear results.
A former financial holding company chair said, "It is hard to change a massive organization with tens of thousands of employees in a short period, so three years is a short time to realize a chair's plans. When you choose a chair in the first place, you should do so with reappointment in mind," adding, "Replacing a chair after three years is tantamount to admitting the outside directors chose the wrong person from the start."
An official at a commercial bank said, "The fact that outside directors can replace a first-term chair who delivered strong results, conversely, means the KB Financial Group governance structure could be shaken through the outside director lineup."