Introduction of Labor Director System in Financial Public Institutions Imminent... Private Companies Also Watching Closely

Interest Grows on Whether Private Companies Will Also Spread Following the Passage of the Public Transportation Act Amendment in the National Assembly

[Asia Economy Reporter Seong Giho] As the bill to introduce the labor director system in the public sector passed the National Assembly, the movements of financial public institutions are also becoming active. The financial sector is closely watching how public institutions respond to this bill. Discussions on introducing the labor union-recommended director system, a preliminary stage of the labor director system, are already underway mainly at policy banks, and there is a forecast that if the system spreads to private companies, the financial sector will be the first target.

According to political circles on the 15th, the National Assembly held a plenary session on the 11th and passed the amendment to the "Act on the Management of Public Institutions (Public Management Act)" focusing on the introduction of the labor director system in public institutions. The labor director system is a system that requires appointing one non-executive director recommended or agreed upon 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 labor 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. Looking at the expiration status of non-executive directors’ terms at these five institutions this year, 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.

First, Korea Deposit Insurance Corporation and Korea Inclusive Finance Agency are expected to introduce the labor director system according to the law. This bill will be enforced six months after its promulgation following the Cabinet meeting. If the bill passes the Cabinet meeting soon, the terms of non-executive directors at Korea Deposit Insurance Corporation and Korea Inclusive Finance Agency will expire in August and October respectively, before the bill is enforced. An official said, "Since there is still time, a final decision has not been made yet," but added, "Financial public institutions must comply with the law, so they are expected to introduce the labor director system."

The problem lies with Korea Credit Guarantee Fund, KAMCO, and Korea Housing Finance Corporation, where the terms of non-executive directors expire before the law is enforced. The financial sector expects that labor unions may propose early introduction opinions because the enforcement of the law is imminent. The financial labor union is also reviewing related matters. A financial labor 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," and added, "The introduction of labor directors before the law is enforced will be decided in consultation with the labor union executives of the respective public institutions."

Because of this, responses from public institutions where the terms of non-executive directors expire before the law is enforced are also becoming busy. An official from the relevant institution said, "We are currently preparing various countermeasures related to the bill," 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 closely watching whether the labor director system will affect private companies beyond public institutions. In particular, labor unions at policy banks have repeatedly pushed for the introduction of the labor union-recommended director system, a preliminary stage of the labor director system. KB Kookmin Bank has attempted to introduce the labor 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 labor union-recommended director system.

A financial labor union official said, "Expansion to private companies is also under discussion," and added, "Taking this bill’s passage as an opportunity, we will review the introduction of systems such as the labor union-recommended director system at 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.