Turbulent Securities Market, CEO's Position Ahead of Term Expiration... 'Stability' Over 'Change'

Chairman and CEO Hyunman Choi of Mirae Asset Securities

[Asia Economy Reporter Lee Seon-ae] As the terms of many domestic securities firms' chief executive officers (CEOs) expire, there is speculation that reappointments will be common through personnel decisions that emphasize 'stability' over 'change.' Despite receiving dismal performance results, the tense atmosphere in the securities industry, where restructuring has intensified due to liquidity crises, is demanding stable risk management through reappointments rather than instability caused by replacements.

According to the financial investment industry on the 23rd, among 28 domestic securities firms, 16 CEOs from 14 companies are approaching the end of their terms either at the end of this year or in March next year. The market largely does not expect a 'mass replacement.' This is because the poor performance is attributed to the market downturn rather than the CEOs' management capabilities.

A senior official from a domestic securities firm hinted, "Since the market situation is very unstable, rather than taking reckless steps through CEO replacements, it seems that there will be a focus on stable risk management by those with management experience, leading to many reappointments. Additionally, the prevailing sentiment is that this year's poor performance is due to the market and not dependent on each CEO's management ability."

Industry views on Choi Hyun-man and Lee Man-yeol, representatives of Mirae Asset Securities, lean toward reappointment. Their extensive experience makes them optimal for risk management, increasing the likelihood of reappointment. Park Hyun-joo, chairman of Mirae Asset Financial Group, also drew attention by stating that there would be no major personnel changes. Opinions on Jung Il-moon, CEO of Korea Investment & Securities, are divided. His achievement of setting record-high net profits for three consecutive years since taking office suggests a conservative view toward replacement. However, his external image has been tarnished due to inadequate IT management and violations of short-selling regulations, which could hinder a fifth term, so reappointment is not guaranteed. Moreover, the failure to secure major initial public offering (IPO) underwriting deals such as LG Energy Solution has led to evaluations that the competitiveness of this investment banking powerhouse has declined.

The terms of Park Jung-rim and Kim Sung-hyun of KB Securities, Lee Young-chang of Shinhan Investment Corp., Lee Eun-hyung of Hana Securities, Hwang Hyun-soon of Kiwoom Securities, Lee Seok-ki of Kyobo Securities, Lee Chang-geun of Daol Investment & Securities, Kwon Hee-baek of Hanwha Investment & Securities, Choi Byung-chul of Hyundai Motor Securities, Kim Byung-young of BNK Investment & Securities, Ko Won-jong of DB Financial Investment & Securities, and Kim Shin of SK Securities are also expiring. Seo Byung-gi, CEO of IBK Investment & Securities, had his term expire in March this year but is currently in the process of extension.

Lee Young-chang of Shinhan Investment Corp. and Lee Eun-hyung of Hana Securities, the youngest CEO in the industry, are evaluated as highly likely to be reappointed. Lee Young-chang was appointed in 2020 after former CEO Kim Byung-chul resigned due to the Lime Asset Management private equity fund scandal. At that time, he reorganized the internal risk management process and recorded strong performance, successfully securing a one-year second term last year. He is expanding wealth management (WM) capabilities to increase profitability in the retail sector and has received positive evaluations for selling the company building as part of efforts to increase investment banking (IB) and proprietary investment (PI) capacity. Lee Eun-hyung is praised for successfully defending performance despite adverse conditions this year and is also considered a figure to strengthen global business. In his first term, he grew net profit by 23.3% to 506.6 billion KRW in 2021 compared to the previous year. In the third quarter of this year, operating profit increased by 47.6% year-on-year to 153.8 billion KRW, and net profit rose by 9.3% to 141.8 billion KRW, leading improved results.

Hwang Hyun-soon, who elevated Kiwoom Securities to become the ninth comprehensive financial investment business operator in Korea this April, also has a high possibility of reappointment. Analysts suggest that replacing Hwang, an IB expert, immediately would be burdensome given Kiwoom Securities' vision to leap into a mega IB.

Meanwhile, a recent variable is that Sohn Tae-seung, chairman of Woori Financial Group, received a heavy disciplinary action. On the 9th, the Financial Services Commission issued a disciplinary warning equivalent to a reprimand to Chairman Sohn. This was because Sohn, who was the bank president when Woori Bank sold Lime funds, was held responsible for incomplete sales. Consequently, securities firms that sold private equity funds are also under sanctions, creating tension. Although securities CEOs not free from private equity fund sanctions succeeded in reappointment last year under the presumption of innocence, they face an uncertain situation this year.

Due to the Lime fund sales, KB Securities President Park Jung-rim and Daishin Securities third-generation owner Yang Hong-seok, vice chairman, received reprimand warnings from the Financial Supervisory Service, and NH Investment & Securities CEO Jung Young-chae received the same notice for the sale of the Optimus fund, which caused damages exceeding 1 trillion KRW. Park's term expires at the end of this year, and Jung's term runs until March the year after next. Sanctions above a reprimand are heavy disciplinary actions, restricting employment in financial companies for 3 to 5 years. However, the sanctions have not yet been finalized.

In the case of KB Securities, there is speculation about replacement since the typical term for KB Financial Group affiliates' CEOs is four years (2+1+1). There has been no precedent of a CEO serving more than five years at a KB Financial Group affiliate. CEO Kim Sung-hyun and CEO Park Jung-rim are currently in their fourth year, having served an initial two-year term plus two additional one-year terms. According to convention, neither may be reappointed. However, CEO Kim has a chance for reappointment, recognized for securing the lead underwriting role in the LG Energy Solution IPO, which was the largest success in the history of the Korea Exchange. It is speculated that CEO Park will leave KB Securities to focus on roles within the financial holding company.

An industry insider said, "As uncertainties in the capital market increase due to the Gangwon-do Legoland incident and the new capital securities call option deferral issue, many view that the year-end CEO personnel decisions will depend more on the ability to solve immediate challenges than on performance."

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