'Financial Holding Company Chairman Reappointment Prevention Act' Proposed... "Excessive Intervention Weakens Competitiveness" (Comprehensive)

First Bill Proposed to Limit Reappointment to One Term, Maximum 6 Years
Controversy Over Authoritarian Governance... 13 Ruling Party Lawmakers Participate
Excessive Regulation Debate... Concerns Over Hindering Financial Firms' Mid- to Long-Term Development

[Asia Economy Reporters Jin-ho Kim and Seung-seop Song] A bill limiting the reappointment of financial holding company chairpersons to one time, with a maximum term of six years, has been proposed in the National Assembly. This is a strong regulatory measure following the ‘self-reappointment prevention bill,’ which prevents CEOs from participating in the board of directors to decide their own reappointment. The ruling party, which proposed the bill, states that the purpose is to strengthen the fairness and independence of financial companies, but it is expected that controversy over excessive political intervention in the governance of private companies will be unavoidable.

Additionally, the bill could hinder the medium- to long-term development of financial companies, so significant difficulties are anticipated during the legislative process. Experts agree that enhancing transparency in governance is desirable given the public nature of the financial industry, but they express concerns that excessive regulation could lead to a decline in the competitiveness of financial firms.

According to sources from the political and financial sectors on the 13th, Park Yong-jin, a member of the National Assembly’s Political Affairs Committee from the Democratic Party of Korea, along with 12 other lawmakers, proposed the ‘Partial Amendment to the Act on the Governance of Financial Companies’ the day before.

The amendment mainly stipulates limits on the reappointment and total term of financial holding company CEOs and prohibits full-time executives from concurrently holding full-time executive positions at other companies. Park has been preparing the related bill since last year. A representative from Park’s office explained, "After announcing the intention to propose the bill in June last year and conducting detailed discussions, we submitted the amendment. The core is to limit the reappointment of financial holding company chairpersons to one time, with a maximum term of six years."

Earlier, in June last year, Park held a press conference with the National Financial Industry Labor Union and the National Office Financial Services Labor Union, stating, "We intend to limit the term and reappointment to prevent the concentration of power caused by repeated reappointments of financial holding company CEOs and to secure fairness and independence."

The financial sector is on high alert over the ruling party’s lawmakers proposing a bill that blocks the reappointment of financial holding company chairpersons. There are concerns that the ruling party, which holds a majority of seats, might pass the bill unilaterally. Although the controversy over the autocratic governance structure of financial holding company chairpersons is not new, attention is focused on the increased possibility of legislation. If the bill passes within the year, it could put a red light on the third reappointments of the chairpersons of Woori Financial Group and Shinhan Financial Group, whose terms expire at the end of March next year.

Therefore, significant resistance from financial companies is expected during the bill’s advancement. Voices criticizing excessive political intervention in private governance are likely to rise, especially from the financial sector. It is argued that limiting the term is undesirable since reappointment can be based on ability or performance, and the appointment of chairpersons also requires shareholder approval.

A financial sector official said, "To move beyond the past focus on short-term performance and become a global financial group, a mid- to long-term management strategy based on strong leadership is necessary. If the chairperson’s term is limited to six years, core businesses requiring long periods, from overseas expansion to digital transformation, will inevitably face setbacks." Another financial sector official added, "When a new CEO comes in, it usually takes considerable time to stabilize the organization. To grow based on organizational stability and present a vision, a certain term guarantee is necessary."

Experts: "Governance issue, but concerns over side effects of strong regulation"

Experts agree with the bill’s purpose of enhancing governance transparency but point out that excessive regulation could lead to a decline in financial firms’ competitiveness. They explain that limiting reappointment terms may cause management to focus on short-term performance rather than long-term visions spanning 10 or 20 years.

Professor Woo-jin Kim of Seoul National University’s Business School said, "The market principle is that if you do well, you continue; if not, you stop. For professional managers to manage with a sense of ownership like owners, long-term term guarantees are necessary, not short-term." He added, "If reappointment is not possible and CEOs are replaced in a short period, who would take risks and manage with a long-term perspective?"

In fact, long-serving CEOs are common in advanced global financial countries like the United States. Jamie Dimon, Chairman of JP Morgan Chase, and Lloyd Blankfein, former Chairman of Goldman Sachs, are representative examples. Dimon, in particular, is regarded as a legendary figure on Wall Street, having led the company for 16 years, strengthening the bank’s functions and growing the company through mergers and acquisitions. Since his appointment in 2006, he provided strong leadership during the 2008 financial crisis, stabilizing the organization and leading JP Morgan Chase’s rapid growth to this day.

Professor Kim said, "Finance and banking are industries after all, so emphasizing public nature too much and imposing government control is inappropriate. Looking at U.S. financial CEOs, many have led their companies successfully over long tenures."

Professor Ji-yong Seo of Sangmyung University’s Business Administration Department said, "Domestic financial companies have a somewhat public character, so enhancing governance transparency seems desirable," but he also diagnosed, "If overly strong regulations like this bill are introduced, controversy over private sector intervention will be inevitable."

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