Financial Public Institutions Busy with Labor Director System... Tension Rising in the Financial Sector

Interest Grows on Whether Private Companies Will Follow After the Passage of the Public Transportation Act Amendment in the National Assembly

[Asia Economy Reporter Kiho Sung] As the labor director system in the public sector has passed the National Assembly, financial public institutions are busy with preparatory work. The introduction of the union-recommended director system, a preliminary stage of the labor director system, is gaining momentum mainly in policy banks, and financial companies are closely watching the responses of public institutions amid expectations that the system will first target the financial sector if it expands to private companies.

According to political circles on the 13th, the National Assembly held a plenary session on the 11th and passed a revision bill of the "Act on the Operation of Public Institutions (Public Operation Act)" centered on the introduction of the labor director system in public institutions. The labor director system is a system that appoints one non-standing director recommended or consented by worker representatives to the board of directors to ensure management transparency of public enterprises and quasi-governmental institutions. Although it repeatedly failed to pass the National Assembly due to controversies over union management intervention, it gained momentum this year as candidates from both ruling and opposition parties expressed support ahead of the presidential election.

There are a total of five public institutions in the financial sector where the labor director system will be introduced: the Korea Inclusive Finance Agency, Korea Credit Guarantee Fund, Korea Deposit Insurance Corporation, Korea Asset Management Corporation (KAMCO), and Korea Housing Finance Corporation. Regarding the expiration of non-standing directors' terms this year at these five institutions, Korea Credit Guarantee Fund has 2 (January), KAMCO 2 (April), Korea Housing Finance Corporation 3 (June), Korea Deposit Insurance Corporation 3 (August), and Korea Inclusive Finance Agency 2 (October), totaling 12.

Since the bill is scheduled to be enforced six months after promulgation following the Cabinet meeting, the Korea Deposit Insurance Corporation and Korea Inclusive Finance Agency are expected to introduce the labor director system according to the law. An official said, "Since there is still time, the final decision has not been made yet," but added, "Financial public institutions must comply with the law, so they will introduce the labor director system."

The issue lies with institutions such as Korea Credit Guarantee Fund, KAMCO, and Korea Housing Finance Corporation, where the terms of non-standing directors expire before the law takes effect. The financial sector expects that unions may propose early introduction opinions because the law's enforcement is imminent. A financial union official said, "Since the bill has not yet passed the Cabinet meeting and has just passed the National Assembly, internal discussions on future responses are underway," adding, "The introduction of labor directors before the law takes effect will be decided in consultation with the union executive of the relevant public institution."

Responses from public institutions where non-standing directors' terms expire before the law's enforcement are also becoming active. An official from the relevant institution said, "Various countermeasures related to the bill are currently being prepared," and added, "Especially, once guidelines from the Ministry of Economy and Finance, the competent ministry, are issued, we will review and respond accordingly."

The financial sector is also keenly watching whether the labor director system will affect private companies beyond public institutions. In particular, policy banks have repeatedly pushed for the introduction of the union-recommended director system, a preliminary stage of the labor director system. KB Kookmin Bank has attempted to introduce the union-recommended director system every year since 2017, and there is speculation that Woori Financial Group, recently privatized and where the employee stock ownership association has become the largest shareholder, may also move to introduce the union-recommended director system.

A financial union official said, "Expansion to private companies is also under discussion," and added, "Taking this bill's passage as an opportunity, we will consider introducing the union-recommended director system and others in private banks where the board of directors is decided through shareholders' meetings, including policy banks."

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