'99% Pass' Financial Public Enterprise Board... Background Includes Cheongwadae, Political Parties, and Camp Appointments (Comprehensive)

218 of 219 Proposals Passed... Automatic Approval if Submitted
Agenda Details, Director Remarks, and Voting Results Often Omitted
4 out of 10 Executives at Financial Public Enterprises Face Nepotism Controversy
Subsidiaries' Poor and Opaque Disclosures Remain Untouched
Experts Say "Public Institutions Must Improve Governance First"

[Asia Economy Reporter Song Seung-seop] It has been found that the approval rate of agenda items at the boards of directors of financial public institutions this year is close to 100%. The disclosure methods varied by institution, and there were numerous cases where substantial information was omitted. While financial authorities have criticized private financial companies for reducing boards of directors?who are supposed to monitor and control management?to mere rubber stamps, criticism is now emerging that their management and supervision of the boards of their affiliated institutions have been inadequate.

Omission of Statements and Voting Results... Some Cases Handled Confidentially Without Explanation

According to the Public Institution Management Information System (ALIO) on the 29th, eight financial public institutions (Seomin Geumyung Jinheungwon, Korea 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) held a total of 71 board meetings this year. A total of 219 agenda items were submitted to the boards, of which 218 were approved, resulting in an approval rate of 99.5%.

There were only five cases where agenda items were amended after discussions among directors. The majority of agenda items were approved as originally proposed. The only agenda item that was rejected was the "Asian Development Bank (ADB) Trust Fund Loan Proposal" discussed at the Korea Securities Depository board meeting in July.

The institution that handled the most agenda items was Seogeumwon. It passed 52 items over 10 board meetings this year, with a 100% approval rate. However, its disclosures were sloppy. The minutes of the most recent board meeting omitted detailed discussion processes for six agenda items. These included proposals such as "Partial Amendment to the Articles of Incorporation" and "Partial Amendment to the Work Method Manual," but no explanations were provided about which clauses were changed or how.

Many institutions did not disclose whether votes were in favor or against each agenda item. Typically, private financial holding companies indicate each director’s area of expertise and their voting stance on each agenda item. However, among financial public institutions, only Seogeumwon and Jugeumgong partially disclosed voting results in some minutes. Even then, disclosures were poorly managed, only showing unanimous approval, or later removing the voting result sections altogether.

There were also many cases where participants’ statements were disclosed opaquely. IBK Industrial Bank summarized statements made at board meetings in brief. Even these summaries were not detailed. For all 39 agenda items processed this year, the summaries simply stated "agreed with the agenda." The Korea Deposit Insurance Corporation created a section called "Main Discussion Contents," but marked board members as "000," making it impossible to identify speakers. KDB Industrial Bank treated a significant number of voting and reporting agenda items as confidential. Although current regulations do not require disclosure of meeting contents, not revealing the agenda or reasons for confidentiality is criticized as far from transparent information disclosure.

The fact that financial public institution boards have effectively become rubber stamps and their operations have deteriorated is largely attributed to the entrenched practice of "nakhasan insa" (parachute appointments). Repeated appointments based on political or partisan interests rather than expertise in finance, accounting, or management have severely diminished the function and significance of the boards.

In fact, looking at the current executives of the eight financial public institutions, 4 out of 10 are not free from parachute appointment controversies. Among 60 executives including full-time heads, full-time auditors, and non-executive directors, 23 (38.3%) have been involved in parachute appointment controversies.

Lee Gye-moon, head of Seogeumwon, is a former spokesperson for the Ministry of Strategy and Finance and was appointed in 2018 amid suspicions of "favoring retirees." His career mainly involved budgeting, policy, and foreign exchange, which was considered distant from the field of microfinance. Last year, when Lee Myung-ho, a senior expert of the Democratic Party, was appointed as the new president of the Korea Securities Depository, the labor union protested.

4 out of 10 Involved in Parachute Appointment Controversies... Many from Blue House, Political Parties, and Campaigns

Many parachute appointees also occupy key auditor positions. Auditors are responsible for monitoring the CEO, and overseeing employee corruption, misconduct, and accounting. Jeong Jae-ho, who began his term as auditor at IBK Industrial Bank 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 the auditor position. Lee Han-gyu, appointed auditor by the Korea Deposit Insurance Corporation in October last year, is a former Democratic Party policy director. Cho Sung-doo, auditor at Seogeumwon, was a specialist on the Roh Moo-hyun presidential transition committee.

Among outside directors, many also come from the Blue House, political parties, and election campaigns. Park Young-mi, a non-executive director at KAMCO, served as the Democratic Party’s regional chair for Jung-gu and Yeongdo-gu. Park Sang-hyun, another non-executive director, was a member of the Democratic Party’s Busan City Party’s 4.7 by-election pledge team. Seon Jong-moon, a non-executive director at the Korea Deposit Insurance Corporation, served as a political special advisor to candidate Moon Jae-in during the 19th presidential election.

Some view the lack of unified regulations and lax current laws as reasons why institutions do not operate their boards diligently. The Public Records Management Act requires public institutions to prepare minutes for major meetings. However, it only mandates recording the "summary of statements," making it difficult to verify the specific context and content of discussions. Civic groups continue to demand standardization of public institution meeting minute formats and more detailed record-keeping for this reason.

There is also much criticism that vague or broad confidentiality clauses obstruct transparent disclosure. The Act on Disclosure of Information by Public Institutions broadly defines 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 basis for deciding whether to disclose meeting minutes and participant information needs to be reorganized."

Consequently, criticism arises that, unlike private financial holding companies, there has been insufficient management and supervision to enhance internal governance and board independence in financial public institutions. When the Financial Supervisory Service notified private financial holding companies in 2018 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 emphasize that before urging private sector changes, public institutions must first eradicate parachute appointments and correct governance and board operation practices. Professor Kim Dae-jong of Sejong University’s Department of Business Administration explained, "Financial public institutions have responsibilities to the public unlike private financial companies. 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.