73% of Outside Directors at 5 Major Financial Holding Companies and Banks Have Terms Ending in March Next Year

47 out of 64 Outside Directors in the Financial Sector Near Term Expiration
Little Change Expected Considering Practices and Strict Screening
Current Policy Likely to Continue Amid Ongoing Issues Like Household Debt

[Asia Economy Reporter Kwangho Lee] It has been revealed that 73% of outside directors at major domestic financial holding companies and banks will have their terms expire in March next year. Considering the previous practice of serving the maximum term (6 years) and the stringent qualification requirements, the prevailing outlook is that there will be no significant replacements. Recent pressing board issues such as the surge in household debt, financial authorities' stringent regulations due to real estate problems, digital transformation responses, and strengthening ESG (Environmental, Social, and Governance) are also factors pointing to maintaining the current stance.

At 5 Major Holdings and Banks, 7 out of 10 Terms Expire

On the 9th, Asia Economy investigated the status of outside directors at the five major financial holdings and their affiliated five major banks?KB, Shinhan, Hana, Woori, and NH Nonghyup?and found that out of a total of 64 directors, 47 (73.4%) have terms expiring in March next year.

By holding company, KB Financial’s seven outside directors?Stewart Solomon, Sunwoo Seokho, Choi Myunghee, Jung Guwhan, Kim Kyungho, Kwon Seonju, and Oh Gyutaek?will all complete their terms in March next year. Shinhan Financial has 8 out of 12 directors whose terms end, including Park Ansun, Byun Yangho, Sung Jaeho, Lee Yoonjae, Choi Kyungrok, Heo Yonghak, Yoon Jaewon, and Jin Hyundeok. Hana Financial has 6 out of 8 directors?Park Wonku, Baek Taeseung, Kang Hongjin, Yang Donghoon, Heo Yoon, and Lee Jungwon?whose terms expire, while Woori Financial’s 4 outside directors?Noh Sungtae, Park Sangyong, Jung Chanhyung, and Jang Dongwoo?will finish between December this year and March next year. NH Nonghyup Financial has 3 out of 7 directors?Kim Yonggi, Nam Yuseon, and Lee Jinsun?falling under this category.

Among banks, at KB Kookmin, 4 out of 5 directors (Im Seungtae, Ahn Kanghyun, Seok Seunghun, Yoo Yonggeun); at Shinhan, 3 out of 6 (Seo Giseok, Yoon Seunghan, Lee Heunya); at Hana, 5 out of 6 (Hwang Deoknam, Go Youngil, Kim Taeyoung, Yoo Jaehun, Lee Myungseop); at Woori, all 5 (Park Sangyong, Noh Sungtae, Jung Chanhyung, Park Suman, Kim Junho); and at Nonghyup, 2 out of 4 (Lee Kwangbeom, Ha Jun) will have their terms expire.

High Possibility of Mass Reappointments... Strengthening the ‘Home Base’ System?

A financial industry insider said, "Financial holdings and banks tend to retain outside directors as much as possible, and considering the recent unstable management environment, the scale of replacements will not be large." However, the insider added, "In the case of Hana Financial, due to the chairman issue, there may be changes in the outside directors with the chairman nomination committee formation in mind." Another insider pointed out, "The reason financial holdings and banks prefer reappointments is also because the conditions for nominating outside director candidates are stringent." According to the Financial Company Governance Act, outside directors must be appointed as individuals with abundant expertise or practical experience in finance, economics, management, law, or accounting. Persons who have significant business relationships with the company or are in business competition or cooperation cannot serve as outside directors. In other words, conflicts of interest as well as controversies related to academic or regional ties must be thoroughly examined.

Outside directors at financial companies are also restricted from concurrently serving as outside directors at other companies, which is another obstacle. Once appointed as a financial company outside director, they cannot serve as outside directors in other industries such as manufacturing, electronics, or distribution. This inevitably narrows the talent pool. Qualification requirements are becoming even more stringent. The term for outside directors at listed companies with total assets exceeding 2 trillion KRW is limited to 6 years (9 years including affiliates) under the Commercial Act. Accordingly, four outside directors?KB Financial’s Stewart Solomon, Shinhan Financial’s Choi Kyungrok, Hana Financial’s Park Wonku, and Hana Bank’s Hwang Deoknam?have reached the maximum term and cannot be reappointed next year.

A financial industry insider forecasted, "Outside directors at financial holdings and banks are key positions involved in selecting major executives and determining their compensation. As financial holding chairmen are strengthening the ‘home base’ system, there is a high possibility of mass reappointments except for those who have completed their terms."

Meanwhile, outside directors at financial holdings and banks are provided with vehicles and receive high compensation. According to an analysis by the corporate evaluation site CEO Score of the compensation of 331 outside directors at 105 companies, including financial companies with total assets over 2 trillion KRW or 145 listed companies last year, the average compensation for outside directors at financial holdings was the highest at 66.6 million KRW.

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