End-of-Term Parachute Acceleration Forecasted... Union-Recommended Director System Virtually Doomed (Comprehensive)

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

[Asia Economy Reporter Kim Jin-ho] As the administration nears its end, ‘parachute appointments’ in financial public institutions are expected to become even more rampant. There is speculation that in the case of non-executive director positions, whose terms are mostly guaranteed even after the administration ends, 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 regulatory nature of the financial industry. The ‘union-recommended director system,’ which the Moon Jae-in administration proposed as a campaign pledge to prevent parachute appointments, is widely regarded as having been effectively nullified.

◇ 11 Non-Executive Director Positions Expiring by the End of the 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-deok (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 and KAMCO will each have two non-executive directors completing their terms before May next year. The Korea Deposit Insurance Corporation and Korea Export-Import Bank will each replace one director.

Within the financial sector, there is a strong expectation that these 11 non-executive director positions will also be subject to ‘parachute’ or ‘favor-for-favors’ appointments. Given that terms are generally guaranteed even after the administration ends, it is anticipated that ‘favoring their own people’ will intensify.

This atmosphere is not limited to the financial sector but is spreading across all public institutions. Recently, controversies arose when key figures who led the Moon administration’s core economic policy of income-led growth were appointed 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 expected this government to be different, but in the end, it does not seem much different from previous ones," adding, "So much so that competition among ruling party figures for financial public enterprise appointments is cited as a reason for the delayed appointments."

◇ ‘Union-Recommended Director System’ Effectively Nullified by Parachute Appointments = 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 key pledge by President Moon aimed at improving governance in public institutions and solidifying a responsible management system. Since the Moon administration began, efforts to enhance workers’ rights and prevent parachute appointments have been actively pursued, especially in financial public institutions, but these attempts have repeatedly failed.

The IBK union tried to introduce the system again in April following an attempt in 2019, but it 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 the Korea Export-Import Bank, where a former Blue House official is rumored to be the nominee, has added fuel to the fire. Even at the Korea Export-Import Bank, where the system’s introduction was considered most likely, rumors circulate that a professor who previously served as a Blue House secretary is waiting for a ‘parachute’ appointment. 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 and others strongly oppose, arguing that the promise of introducing the union-recommended director system is being blocked by a Blue House insider. The union claims that the management is stalling to send down parachute appointees. An insider familiar with internal affairs said, "There are rumors that a professor who served as a Blue House secretary has been nominated," adding, "Suspicion of a ‘parachute’ appointment 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’s remarks on the appointment are somewhat skeptical. On the 23rd, at the National Assembly, regarding the appointment of non-executive directors at the Korea Export-Import Bank, he said, "There is no need to exclude union-recommended directors, nor is it mandatory to select them." This contrasts with the agreement reached in 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 director system will inevitably be lost within the current administration’s term. This is due to the fact that only about ten non-executive director positions are expiring and that there are not many financial public institutions favorable to the system’s introduction. A financial sector official said, "The Korea Export-Import Bank and IBK 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 like KDB Industrial Bank and Korea Deposit Insurance Corporation is virtually nonexistent."

Meanwhile, the Financial Union has stepped up pressure on the government to introduce the union-recommended director system. On the 9th, the Financial Union stated in a press release, "The government and ruling party should fulfill their promise of labor participation in management by appointing union-recommended non-executive directors at institutions like the Korea Export-Import Bank and KAMCO, which may be the last opportunity within the current term."

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