The 'Labor Director System' Becomes a Presidential Election Issue... Rising Tensions in the Financial Sector

National Assembly Main Chamber / Photo by Dongju Yoon doso7@

[Asia Economy Reporter Kiho Sung] The National Assembly's Planning and Finance Committee is set to begin discussions on the amendment to the Act on the Management of Public Institutions (Public Institutions Act), which includes the introduction of the labor director system in public institutions. With the presidential election approaching next year, both ruling and opposition presidential candidates have expressed support for the introduction of the labor director system, accelerating the momentum. The financial sector is closely monitoring the passage of the related bill. Discussions on introducing the union-recommended director system, a preliminary stage of the labor director system, are already underway mainly at policy banks, and if the bill passes and is introduced to private companies, the financial sector is expected to be the first target.

According to political circles on the 31st, the National Assembly's Planning and Finance Committee plans to hold a subcommittee meeting in the afternoon to start discussions on the Public Institutions Act. The Act includes provisions requiring that among the standing directors of public institutions, there must be persons recommended by labor unions.

The Public Institutions Act discussions are gaining speed as both ruling and opposition candidates have expressed support ahead of next year’s presidential election. Lee Jae-myung, a member of the Democratic Party of Korea, visited the Korean Confederation of Trade Unions last November and promised to process the labor director system. The People Power Party, which had previously opposed the system, saw a turnaround when presidential candidate Yoon Seok-youl visited the Korean Federation of Trade Unions in December and expressed support for introducing the labor director system in the public sector. At that time, it was reported that Yoon explained to the Korean Federation of Trade Unions that the People Power Party as a whole had decided to positively accept the introduction of the labor director system in the public sector.

If this bill passes, labor directors will be appointed in quasi-governmental financial institutions such as the Korea Asset Management Corporation, the Deposit Insurance Corporation, the Korea Housing Finance Corporation, the Korea Credit Guarantee Fund, and the Korea Inclusive Finance Agency. In addition, discussions on the union-recommended director system are ongoing mainly at policy banks. The Export-Import Bank of Korea, IBK Industrial Bank of Korea, and KDB Industrial Bank are among the targets, and demands for introducing the union-recommended director system may also increase at the Korea Development Bank.

If labor directors or union-recommended directors appear in financial public enterprises and policy banks, the system could spread to private financial companies. The KB Financial Group labor union has been advocating for the union-recommended director system annually since 2017. Furthermore, Woori Financial Group, which recently succeeded in privatization, may also push for the introduction of this system as its employee stock ownership association is the largest shareholder.

The management side is unable to hide its concerns, as labor-management conflicts could extend to the board of directors. A financial sector official said, "There are certainly advantages to the labor director system and the union-recommended director system," but added, "However, since it could hinder swift decision-making, careful discussions are essential."

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