A Parachute Landing in Financial Public Enterprises... Creating an Opaque Governance Structure

40% of Financial Public Corporation Executives Face Parachute Appointment Controversy
Some Lack Financial Knowledge, Only Share Political Views
Private Financial Firms Warned for Poor Meeting Records
Subsidiaries' Poor and Opaque Disclosures Remain Unchecked
Experts Urge Governance Reform in Public Institutions First

[Asia Economy Reporter Song Seung-seop] The criticism that the boards of directors of financial public institutions have become mere 'rubber stamps' is mainly attributed to the entrenched practice of 'parachute appointments.' In public enterprises, where government influence is strong, appointments are repeatedly made based on political and partisan interests rather than expertise in finance, accounting, or financial knowledge, leading to a serious deterioration in the function and significance of the boards. The lack of pressure to improve governance, unlike in private companies, and the lax regulatory provisions are also cited as background factors. Experts unanimously agree that the backward governance structure of public institutions operated with taxpayers' money must be reformed first.

4 out of 10 face parachute appointment controversies... Many from the Blue House, political parties, and campaign backgrounds

On the 29th, an examination of the executive status of eight financial public institutions (Seomin Financial Support Center, Credit Guarantee Fund, Korea Deposit Insurance Corporation, IBK Industrial Bank of Korea, KDB Industrial Bank, Korea Securities Depository, Korea Asset Management Corporation, Korea Housing Finance Corporation) through the Public Institution Management Information System (ALIO) revealed that 4 out of 10 were not free from parachute appointment controversies.

Among 60 executives including full-time heads, full-time auditors, and non-standing directors, a total of 23 individuals (38.3%) were involved in parachute appointment controversies. Lee Gye-moon, head of the Seomin Financial Support Center, a former spokesperson for the Ministry of Strategy and Finance, was appointed in 2018 amid suspicions of 'favoring retirees.' His career mainly involved budget, policy, and foreign exchange fields, which were considered distant from the field of Seomin finance. Last year, the appointment of Lee Myung-ho, a senior expert of the Democratic Party of Korea, as the new president of the Korea Securities Depository sparked opposition from the labor union.

Many parachute appointees were also concentrated in key positions such as auditors. Auditors are responsible for monitoring the institution's CEO and supervising employee corruption, misconduct, and accounting. Jeong Jae-ho, who began his term as auditor at IBK in March, is a former Democratic Party lawmaker. After serving as a secretary of the 20th National Assembly's Political Affairs Committee and failing to run in the next general election, he took on the auditor role. Lee Han-gyu, appointed auditor by KDIC in October last year, is a former policy director of the Democratic Party. Cho Sung-doo, auditor of the Seomin Financial Support Center, was a specialist on President Roh Moo-hyun's transition committee.

Among outside directors, many also came from the Blue House, political parties, and election campaign backgrounds. Park Young-mi, a non-standing director of KAMCO, served as the regional chairperson for Jung-gu Yeongdo-gu of the Democratic Party, and Park Sang-hyun, another non-standing director, was part of the Democratic Party's Busan City Party's 4.7 by-election pledge team. Seon Jong-moon, a non-standing director of KDIC, served as a political special advisor to candidate Moon Jae-in during the 19th presidential election.

In the private sector, even minor deficiencies in minutes lead to 'disciplinary action'... Financial public enterprises remain a 'no-wind zone'

There is also a view that institutions do not operate their boards diligently due to loose current laws and the absence of unified regulations. The Public Records Management Act requires public institutions to prepare minutes when holding major meetings. However, it only mandates recording the 'summary of remarks,' making it difficult to verify the specific context and content of the discussions. This is why civic groups continuously demand standardization of public institution meeting minutes formats and more detailed record-keeping.

There are many criticisms that vague or broad non-disclosure clauses hinder transparent disclosure. The Act on Disclosure of Information by Public Institutions broadly stipulates conditions under which decision-making can be kept confidential. Jin-im Jeong, director of the Information Disclosure Center for a Transparent Society, pointed out, "A considerable number of public institutions judge meeting-related information as confidential, blocking citizens' access to information," and added, "The grounds for deciding whether to disclose minutes and information about meeting attendees need to be reorganized."

Consequently, unlike private financial holding companies, financial public institutions have faced criticism for lacking management and supervision to enhance internal governance and board independence. In 2018, when the Financial Supervisory Service notified private financial holding companies that their boards' roles were generally inadequate, they undertook major reforms. Last year, Hana Financial Group and Woori Financial Group even received 'management caution' measures for merely formalistic board meeting minutes.

Experts pointed out that before urging changes in the private sector, public institutions must first eradicate parachute appointments and correct governance and board operation practices. Kim Dae-jong, professor of business administration at Sejong University, explained, "Financial public institutions have responsibilities to the public unlike private financial companies," adding, "Since current boards are far from independent and supervisory, they need to be operated transparently."

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