Strengthening Subsidiary Independence... Shinhan Financial Steps Back from Executive Appointments and Performance Rewards

Vice Presidents and Deputy Bank Presidents' Personnel Authority Transferred to Each Subsidiary... Self-Governance Committee Retains Only Group CEOs' Personnel Authority
Subsidiary Executives' Long-Term Performance Compensation Also Changed to Follow Internal Standards

[Asia Economy Reporter Haeyoung Kwon] Shinhan Financial Group is transferring the personnel authority for all subsidiary executives to each subsidiary. The payment of long-term performance bonuses for subsidiary executives will also be changed to follow the standards of each subsidiary, rather than the holding company. This plan aims to relinquish the excessive authority concentrated in the holding company and strengthen the management independence of subsidiaries.

According to the financial sector on the 27th, Shinhan Financial Group held a board meeting on the 21st and decided to transfer the personnel authority for subsidiary vice presidents (acting) and deputy heads (acting), which was held by the holding company's Subsidiary Management Committee (Ja-gyeong-wi), to each subsidiary.

A Shinhan Financial Group official explained, "We decided to transfer the personnel authority to strengthen the responsible management of the group’s CEOs and expand the management independence of subsidiaries."

Shinhan Financial Group deleted the provisions related to the selection criteria and review of candidates for subsidiary vice presidents (acting) and deputy heads (acting) from the duties of the Subsidiary Management Committee as stipulated in the internal governance regulations. Going forward, the committee will only be able to exert influence through leadership evaluations of subsidiary executives.

Accordingly, the personnel authority held by the Subsidiary Management Committee will be limited to the group CEOs. They will be responsible for managing the candidate pool, including setting qualification requirements, recommending candidates, selecting candidates, and verifying candidates for subsidiary CEOs.

Shinhan Financial Group has been continuously reducing its influence over subsidiary executive personnel decisions. In February 2018, it excluded subsidiary compliance officers, risk management officers, and Chief Information Security Officers (CISO) from the committee’s candidate recommendation targets. In December of the same year, it transferred personnel authority for subsidiary division heads, managing directors, and audit-related executives, and now it has transferred all personnel authority for subsidiary vice presidents (acting) and deputy heads (acting).

Furthermore, Shinhan Financial Group has decided to entrust the establishment of compensation standards for subsidiary management to each subsidiary. Until now, the holding company set the standards for long-term performance compensation for management, and all subsidiaries followed the holding company’s standards. Going forward, subsidiaries will be able to pay long-term performance bonuses to management based on standards established by each subsidiary.

Shinhan Financial Group’s relinquishment of control over personnel and compensation for subsidiaries comes amid ongoing criticism that the holding company’s authority is excessively large. In particular, financial authorities have pointed out the need to reduce the holding company’s authority regarding personnel rights. In fact, other financial holding companies such as KB Financial Group and Hana Financial Group only intervene in the appointment of subsidiary CEOs, while the personnel authority for subsidiary executives is entirely held by each subsidiary’s CEO.

Meanwhile, with Shinhan Financial Group transferring all executive personnel authority to each subsidiary following KB Financial Group and Hana Financial Group, Woori Financial Group remains the only one among the four major financial holding companies that exercises personnel authority over subsidiary executives. Earlier this year, Woori Bank revised its internal governance regulations to require prior consultation with the holding company when appointing deputy heads, managing directors, compliance officers, and risk management officers. The holding company effectively holds personnel authority even at the division head level within the bank. If the holding company opposes, the bank president cannot appoint executives solely based on their own decision. The bank president only holds personnel authority at the department head level.

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