[Reporter’s Notebook] Financial Holding Company Boards Filled Only with 'Yes-Men'

[Asia Economy Reporter Sunmi Park] "By involving individuals with expertise and experience in various fields such as finance, economics, management, and accounting in the board of directors, we enhance diversity and professionalism, and strengthen the board's oversight function through the participation of a majority of independent outside directors."

Domestic financial holding companies evaluate that outside directors active on their boards possess diversity and expertise and properly perform oversight functions over management. However, outside directors who receive compensation exceeding 100 million KRW annually often express opinions at board meetings that are limited to ‘approval’ or ‘no special opinion’ regarding management decisions.

The domestic ‘Big 4’ financial holding companies held between 10 and 20 board meetings last year.

KB Financial’s outside directors attended 100% of the 20 board meetings held last year and expressed opinions of either ‘approval’ or ‘no special opinion’ on all agenda items. The situation is similar for other financial holding companies. Hana Financial Group, which held a total of 10 board meetings last year with a 100% attendance rate, raised a single ‘opposition’ on the agenda to amend the group’s internal control regulations due to ‘ambiguous interpretation,’ but most agenda items, including resolutions of the Risk Management Committee and inspections of the internal control system and operations, were approved unanimously.

Woori Financial Group also recorded an average attendance rate of 98% across 14 board meetings, with all outside directors expressing ‘approval’ or ‘no special remarks.’ On major issues such as internal control reports, supervision plans regarding conflicts of interest with major shareholders and executives, and mid- to long-term management plans, all outside directors merely acted as a rubber stamp for management decisions. Shinhan Financial Group held 16 board meetings last year, with some dissenting opinions only on qualifications for non-executive directors or board composition matters.

All decisions within the financial holding companies’ boards, composed of ‘yes-men,’ proceed smoothly. Outside directors, who acted as rubber stamps, received an average annual compensation of 60 to 80 million KRW, including 1 million KRW per meeting attendance fee, with some earning over 100 million KRW.

Of course, it is not new that agenda items submitted to financial holding company boards are easily ‘approved’ without intense discussion.

However, considering the atmosphere last year when financial holding companies were embroiled in heated controversies such as incomplete sales of private equity funds and reappointment issues of key executives, the smoothly proceeding boards filled with unanimous ‘approval’ cannot be viewed favorably. Outside directors who receive high compensation must stop acting as rubber stamps and properly perform their oversight functions by leveraging diversity and expertise.

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