[1mm Financial Talk] Woori Financial, Will the Persistent Conflict Between Chairman and CEO Be Resolved?

History of Conflicts Between Former Jiju Chairmen and Bank Presidents
Will It Continue Despite Complete Government Stake Sale?

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As Kwon Kwang-seok, CEO of Woori Bank, was excluded from the shortlist of candidates for the next bank president and failed to secure reappointment, the history of conflicts between the chairman of Woori Financial Group and the CEO of Woori Bank has come under the spotlight. Since the era of Yoon Byung-chul, the inaugural chairman of the holding company, and Lee Deok-hoon, the bank president, the chairman and the bank president have consistently clashed over various issues. The main cause is attributed to the government’s role as the major shareholder, which kept the group under political influence. However, similar conflicts have continued even after the government sold its major shares in 2016, privatizing the group, raising concerns about how long the discord between the holding company chairman and the bank president will persist.

According to the financial sector on the 4th, the Woori Financial Group Subsidiary CEO Candidate Recommendation Committee (Jachu-wi) selected Lee Won-duk, Senior Executive Vice President of Woori Financial Group; Park Hwa-jae, Executive Vice President of Woori Bank’s Credit Support Group; and Jeon Sang-wook, Vice President of the Risk Management Group, as the shortlist candidates for the next Woori Bank president. The current CEO, Kwon Kwang-seok, was not included in the candidate pool and thus failed to secure reappointment. Kwon’s term expires this coming March.

Kwon was appointed in March 2020 with an unusual “1+1 year” term. Typically, heads of commercial banks are guaranteed terms of “2+1 years” or “1+2 years.” This shorter term sparked various interpretations both internally and externally.

Since the establishment of the holding company in 2001, Woori Financial Group has seen continuous friction between the chairman and the CEO. Formally, the holding company chairman holds the upper hand, but because the bank accounts for a significant portion of the group’s assets, the bank president wields substantial practical power. In 2003, Chairman Yoon Byung-chul and CEO Lee Deok-hoon engaged in a family feud. The conflict began over differing views on the management normalization plan for Woori Credit Card, a subsidiary. CEO Lee proposed merging Woori Credit Card into Woori Bank, while Chairman Yoon advocated for the credit card company’s independent recovery.

Subsequently, Woori Financial Group imposed sanctions on Woori Bank citing “potential damage to accounting transparency” and “contradiction to group strategy.” CEO Lee received a “strict warning” disciplinary action, while Chief of Management Planning Choi Byung-gil and Chief of Credit Management Kim Young-seok were even asked to serve a “one-month suspension.” However, when Woori Bank denied any wrongdoing and resisted the holding company’s demands, the conflict escalated. As a result, during Chairman Hwang Young-ki’s tenure in 2004, he concurrently served as the bank president.

Woori Bank Ahead of CEO Appointment... Will This Time Be Different?

During the tenure of Chairman Park Byung-won and CEO Park Hae-chun, who took office in 2007, rumors of discord also surfaced. CEO Park frequently blocked Chairman Park’s policies. While Chairman Park supported the government’s “mega bank” plan to merge Korea Development Bank, Industrial Bank of Korea, and Woori Bank, CEO Park opposed it. Inside Woori Financial Group, there were voices criticizing CEO Park for handling internal affairs without considering the holding company’s intentions.

From 2008 to 2013, Chairman Lee Pal-sung clashed repeatedly with CEOs Lee Jong-hwi and Lee Soon-woo. Chairman Lee attempted to strengthen the holding company’s role by introducing a so-called “matrix organization.” This matrix structure appointed heads for business divisions such as household finance, corporate finance, and global business, which limited the bank president’s authority. Both CEOs resisted throughout their terms, and the matrix introduction was ultimately abandoned. A regulation requiring prior consultation between the holding company chairman and the bank president on bank executive appointments was also scrapped due to opposition from Woori Bank.

The recurring conflicts mainly stemmed from Woori Financial Group’s government ownership, which subjected it to political influence. It was openly rumored that the factions supporting the chairman and those backing the bank president had different political connections. Unlike other financial holding companies such as KB, Shinhan, and Hana, where it is common for bank presidents to later become holding company chairmen, Woori Financial Group saw frequent changes in both positions influenced by political forces. The only chairman to secure reappointment was Lee Pal-sung during the Lee Myung-bak administration, who was a close friend of the president and a fellow alumnus of Korea University. Until November 2016, the Korea Deposit Insurance Corporation held 51.10% of Woori Financial Group’s shares. Even after effective privatization, it maintained a 21.40% stake until November last year.

Another factor cited is that Woori Bank, born from the merger of Hanil Bank and Commercial Bank, failed to achieve a chemical integration. When allegations of preferential hiring surfaced in 2017, former Commercial Bank employees accused Hanil Bank alumni of leaking documents, causing internal strife. Woori Bank traditionally alternated its CEOs between Hanil Bank and Commercial Bank backgrounds. When Lee Kwang-gu, from Commercial Bank, resigned taking responsibility, there were suspicions that he was pushed out. Currently, Son Tae-seung, chairman of Woori Financial Group, is from Hanil Bank, while CEO Kwon Kwang-seok is from Commercial Bank.

The key question is whether the personnel changes made by Woori Financial Group after full privatization can resolve these long-standing conflicts. Within the financial sector, Lee Won-duk, Senior Executive Vice President, is considered the leading candidate for the next Woori Bank president. Lee is the only executive serving as an inside director on the holding company’s board alongside Chairman Son. He is also credited with contributing to the long-awaited privatization of Woori Bank.

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