End-of-Term Entrenchment Concerns... Moon's Presidential Pledge Also Hindered by 'Nakhansan Personnel'

11 Non-Executive Director Terms Expire by May Next Year When Moon's Term Ends
Most Terms Guaranteed Even After Regime Change...Concerns Over Parachute Appointments
Union-Nominated Director System in Election Pledges Effectively Doomed

[Asia Economy Reporter Kim Jin-ho] As the administration nears its end, 'parachute appointments' in financial public institutions are expected to become more rampant. Since most non-executive directors have guaranteed terms even after the administration ends, there is speculation that the ruling party's behavior of 'favoring their own people' may noticeably increase. Accordingly, concerns are emerging that the 'invisible hand' of power could have a greater influence in the future, given the characteristics of the financial industry as a regulated sector. The 'union-recommended director system,' which the Moon Jae-in administration proposed as a presidential campaign pledge to prevent parachute appointments, is widely regarded as having been effectively nullified.

◇ 11 Non-Executive Director Positions Expiring by the End of Moon Administration = According to the financial sector on the 30th, by mid-May next year, when President Moon Jae-in's term ends, 11 non-executive director positions at seven financial public institutions (KDB Industrial Bank, Korea Export-Import Bank, IBK Industrial Bank, Korea Deposit Insurance Corporation, Korea Housing Finance Corporation, Korea Credit Guarantee Fund, and Korea Asset Management Corporation (KAMCO)) will be seeking new appointees.

The institution with the most non-executive directors whose terms expire before mid-May next year is KDB Industrial Bank. Non-executive directors Kim Nam-jun (June 27), Lee Yoon (July 31), and Son Gyo-duk (March 29, 2022) will sequentially reach the end of their terms. At the Korea Credit Guarantee Fund, the terms of non-executive directors Han Seung-hee and Seo Jong-sik expire on January 30 next year. IBK Industrial Bank and KAMCO will each have two non-executive directors completing their terms before May next year. Korea Deposit Insurance Corporation and Korea Export-Import Bank will each replace one director.

The financial sector is largely anticipating that these 11 non-executive director positions could also be filled by 'parachute or patronage appointments.' Given that terms are generally guaranteed even after the administration ends, it is expected that 'favoring one's own people' will intensify.

This atmosphere is spreading not only in the financial sector but across all public institutions, where parachute appointments are becoming rampant. Recently, controversies arose when key figures who led the Moon administration's core economic policy of income-led growth descended as 'parachute' appointees at national research institutes such as the Korea Development Institute (KDI) and the Korea Institute for Health and Social Affairs.

A financial sector official remarked, "Many said this government would be different, but in the end, it does not seem much different from previous ones," adding, "So much so that ruling party figures competing with each other is cited as the reason why appointments to financial public enterprise positions are delayed."

◇ Parachute Appointments Render 'Union-Recommended Director System' Virtually Null = As the possibility of parachute appointments grows even for non-executive director positions with expiring terms, controversy surrounding President Moon's pledge of the 'union-recommended director system' is expected to intensify. The union-recommended director system was a major pledge by President Moon to improve governance in public institutions and solidify a responsible management system. Since the Moon administration's inception, it has been actively attempted mainly in financial public institutions to enhance workers' rights and prevent parachute appointments, but it has repeatedly failed.

The IBK Industrial Bank union attempted to introduce it again in April following efforts in 2019 but failed to pass the Financial Services Commission, the relevant authority. In KAMCO's case, the union's recommended candidate was not included in the final pool of non-executive director candidates last August.

Particularly, the recent appointment controversy at Korea Export-Import Bank, where a former Blue House official is rumored to be the nominee, is 'adding fuel to the fire.' Even at Korea Export-Import Bank, where the system's introduction was most likely, rumors circulate that a professor who previously served as a Blue House secretary is waiting for a 'parachute' appointment, causing problems. Typically, when terms near expiration, the bank forms a nomination committee one or two months in advance to minimize vacancies. Currently, there has been nearly a month-long vacancy, which is unusual.

The Korea Export-Import Bank union strongly opposes, saying that the promise of introducing the union-recommended director system by the president is being blocked by a Blue House official. The union claims that management is stalling to send down parachute appointees. An insider familiar with internal affairs said, "There are rumors that a professor who was a Blue House secretary has been nominated," adding, "Suspicion of 'parachute' appointments is spreading because the nomination committee has not been formed even though the predecessor's term expired about a month ago."

Economic Deputy Prime Minister and Minister of Strategy and Finance Hong Nam-ki, who holds the appointment authority, also expressed somewhat skeptical remarks. On the 23rd, regarding the appointment of non-executive directors at Korea Export-Import Bank, he said in the National Assembly, "There is no need to exclude union-recommended directors, nor is it mandatory to select them." This contrasts with the agreement reached last November at the Economic, Social and Labor Council, where the Ministry of Strategy and Finance agreed with public institution unions to actively introduce the union-recommended director system.

There is also analysis that the momentum for promoting the union-recommended system will inevitably be lost within the current administration's term. This is because there are only about ten non-executive director positions with expiring terms, and few financial public institutions are favorable to its introduction. A financial sector official said, "Korea Export-Import Bank and IBK Industrial Bank were considered the most likely financial public institutions to introduce the union-recommended director system," adding, "Since it is not yet institutionalized by law, it is difficult to gain momentum, and the possibility of introduction at other institutions such as KDB Industrial Bank and Korea Deposit Insurance Corporation is virtually nonexistent."

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