Confronting Severe Disciplinary Action or Retreat... Son Tae-seung to Deliberate on Position, Expected to Announce Stance Midweek

Legal Action Brings Burden of 'Direct Confrontation with Authorities'
Withdrawal Could Cause Governance Confusion at Woori Financial Group

Son Tae-seung, Chairman of Woori Financial Group and President of Woori Bank

[Asia Economy Reporter Kim Hyo-jin] "Give me time to think." Son Tae-seung, Chairman of Woori Financial Group and CEO of Woori Bank, said this at an extraordinary board meeting on the 31st of last month. It was right after he received a heavy disciplinary decision from the Financial Supervisory Service (FSS) regarding the overseas interest rate-linked derivative-linked fund (DLF) incident.

It does not seem likely to take long for him to make a decision. The options are divided into two: either to take legal action to contest the FSS decision or to give up reappointment. Whatever choice Chairman Son makes after deep consideration, it is expected to have a considerable impact on the financial sector.

According to the financial sector on the 3rd, Chairman Son is expected to announce his position regarding his tenure at the regular board meeting for Woori Bank's settlement report, scheduled no later than the 7th. In principle, he could consider temporarily nullifying the sanctions by filing an administrative lawsuit and a provisional injunction to suspend the enforcement of the disciplinary measures.

The reprimand decided by the FSS Disciplinary Committee is a heavy disciplinary sanction. If confirmed, he can complete his remaining term but cannot be appointed as a new executive in the financial sector for three years. Chairman Son was recommended last December as the next chairman for a three-year term. According to schedule, he will be officially appointed at the shareholders' meeting next month.

Even if the sanction is confirmed, there is no problem in carrying out the term if it is after the shareholders' meeting, that is, after being appointed as the next chairman. Regarding this, the financial authorities plan to complete the resolution procedure for the enforcement of the sanction as early as the beginning of next month. Considering the set schedule, it is interpreted as meaning that the procedure will proceed without any gap.

Therefore, the general view is that if Chairman Son intends to serve as the next chairman, he will likely have to resolve the sanction issue first through legal battles. There is also an analysis that he has a chance of winning in theory. There is room to dispute whether it is appropriate to directly apply the current Corporate Governance Act, which stipulates the obligation to establish internal control standards, to the CEO as the basis for the sanction.

The problem lies in the burden of engaging in a full-scale confrontation with the financial authorities. A financial sector official pointed out, "It would not be easy for the CEO of a financial company, which is supervised across all business areas, to engage in a legal power struggle with the financial authorities," adding, "Concerns about the repercussions of an uncomfortable relationship with the financial authorities may cause internal resistance within the organization and ultimately reduce management momentum." The fact that there has been no case of continuing management after receiving a heavy disciplinary sanction supports this view.

If the 'direct confrontation' card is ruled out, it is possible to assume a situation where Chairman Son resigns or completes his current term and steps down. In any case, the group faces the task of electing a new next chairman. There may be setbacks in management plans to strengthen the non-bank sector through strategic mergers and acquisitions (M&A) to respond to the worsening environment.

The process of selecting the next Woori Bank president by the Group Nomination Committee, which continued until the end of last month, may also fall into uncertainty. Chairman Son serves as the chairman of the Group Nomination Committee. Unless he steps down immediately, there is no problem in proceeding with the remaining procedures as chairman, but the fact that he exercises influence over the appointment of the new head of Woori Bank, the core of the group, while under a heavy disciplinary decision could spark controversy.

Regarding Chairman Son's tenure, the financial authorities drew a line by saying, "It is a matter for (Woori Financial's) shareholders and the board of directors to decide," but also stated, "Considering various circumstances, we expect the company and shareholders to make the decision that best enhances corporate and shareholder value."

Meanwhile, the Woori Bank labor union issued a statement on the 31st of last month, fiercely criticizing the DLF heavy disciplinary decision as a "cover-up strategy obsessed only with sanctioning financial companies while ignoring the fundamental problem of the incident," and announced a 'strong struggle.'

This content was produced with the assistance of AI translation services.