Despite ISS Proxy Advisory Firm's Opposition, Shinhan and Woori Director Appointment Proposals Likely to Pass

Proxy Advisory Firm US ISS Opposes Shinhan and Woori Director Appointments
FSS Raises Sanctions Issue but Approval Likely Considering Stable Earnings Growth

[Asia Economy Reporter Kwangho Lee] The world's largest proxy advisory firm ISS (Institutional Shareholder Services) has expressed opposition to the director appointment proposals of Shinhan Financial Group and Woori Financial Group. However, Shinhan and Woori Financial Groups appear confident that the agenda items will pass at the shareholders' meetings, considering their stable performance growth.

According to financial industry sources on the 25th, ISS recently recommended shareholders to vote against the appointment of Jin Ok-dong as other non-executive director, and Park An-soon, Byun Yang-ho, Sung Jae-ho, Lee Yoon-jae, Choi Kyung-rok, and Heo Yong-hak as outside directors at the Shinhan Financial Group shareholders' meeting scheduled for that day.

Regarding Jin Ok-dong, ISS stated, "The high-level pre-sanctions imposed on director candidate Jin Ok-dong by financial authorities raise serious concerns about his qualifications as a director and risk management." It also pointed out, "Furthermore, when Cho Yong-byeong, Chairman of Shinhan Financial Group, was convicted for employment irregularities, the board failed to dismiss him."

For the other directors, ISS added, "Since the six director candidates collectively failed to expel Chairman Cho from the board despite his guilty verdict, we recommend opposing all six candidates."

In its report on Woori Financial Group, ISS also opposed the reappointment or appointment of outside directors Lee Won-duk, Noh Seong-tae, Park Sang-yong, Jeon Ji-pyeong, Jang Dong-woo, and Jung Chan-hyung. Their appointment proposals are scheduled to be voted on at Woori Financial Group's shareholders' meeting on the 26th.

ISS explained its opposition by stating, "Son Tae-seung, CEO and inside director of Woori Financial Group, was sanctioned by financial authorities for inadequate risk management related to losses from derivative-linked funds (DLF) and Lime incidents. Nevertheless, five director candidates allowed Chairman Son to remain on the board and supported his reappointment in 2020."

Regarding the Lime fund incident, Chairman Son was pre-notified last month by the Financial Supervisory Service of a sanction level just below 'recommendation for dismissal'?a 'suspension from duty'?which is among the highest penalties for financial executives. In January last year, he also received a 'reprimand' for the DLF incident.

ISS is a proxy advisory firm that analyzes corporate shareholders' meeting agendas for global investors and provides voting guidelines. Although ISS opposed the director appointment proposals ahead of the shareholders' meetings, the industry expects smooth approval given the proportion of friendly shareholders.

Shinhan Financial Group posted record-high earnings last year and decided on an industry-leading dividend payout ratio. It is also preparing to amend its articles of incorporation for quarterly dividends this year. Woori Financial Group also succeeded in reappointing Son Tae-seung as chairman at the shareholders' meeting without difficulty last year, despite ISS's opposition.

Meanwhile, Glass Lewis, another global proxy advisory firm alongside ISS, is reported to have expressed support for the director appointment proposals of Shinhan and Woori Financial Groups.

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