[The Editors' Verdict] Qualifications Required for CEOs of Ownerless Financial Companies

[Asia Economy Jeong Jaehyung, Economic and Financial Editor] Cho Yong-byeong, chairman of Shinhan Financial Group, broke expectations of a third term and stepped down. Lee Seok-jun, former head of the Office for Government Policy Coordination who participated in Yoon Seok-yeol's presidential campaign, has been nominated as chairman of NongHyup Financial Group. There are evaluations such as government financial authorities' external pressure rumors, parachute appointments, and government intervention...

How should the governance of ownerless financial companies be handled? Who should take the 'sweet spot' CEO position commanding an annual salary of 1 to 2 billion KRW and overseeing a company with about 10,000 employees and net profits of 3 to 4 trillion KRW?

If it is a company or financial institution with an owner, there is no need to worry. The owner appoints and takes responsibility. However, bank-centered financial holding companies, which can be considered the lifeblood of the economy and have a huge impact on our economy, have no owner.

Before financial liberalization, in the era of 'gwanchi (government control)', bank presidents were sometimes decided with the approval of the Ministry of Finance's bank division chief. After the 1997 foreign exchange crisis, banks escaped strong government control, but the influence of government intervention still remains. During the Lee Myung-bak administration, which was criticized for 'setting Korean finance back by 10 years,' the bizarre term 'the four kings of the financial sector' was coined. There is good government control and bad government control, but this is a clear example of 'bad government control.'

There is also a saying that 'naechi (internal control)' is worse than gwanchi. It refers to maintaining close relationships with major shareholders and acting like an 'owner' under the tolerance of the administration and political circles in ownerless banks. Former Shinhan Financial chairman Ra Eung-chan and former Hana Financial chairman Kim Seung-yu were representative figures, and former Hana Financial chairman Kim Jung-tae took over the baton.

The situation of NongHyup Financial Group, a policy bank similar in nature to Industrial Bank of Korea, is somewhat different. It has been natural for CEOs to come from the Ministry of Strategy and Finance and the Financial Services Commission from the beginning. Inside the organization, there are complaints such as "6 months to adapt after inauguration, 6 months of lame-duck before term expiration, so the actual working period is only 2 years." The argument that organizational vitality should be revived through internal promotion is also persuasive. However, as a policy bank that must actively cooperate with government policies and has a characteristic of 'insider collusion' similar to naechi in public institutions, there is also a logic that government officials are the right candidates to block this.

It is believed that there is a desirable framework for financial company governance somewhere between 'gwanchi' and 'naechi.' Then, what qualifications would justify allowing several renewals?

I would like to present the case of Yoon Jong-kyu, chairman of KB Financial Group, who succeeded in a third term in 2020 and whose term expires next November. Since his inauguration in November 2014, Chairman Yoon has placed KB Financial, which was once called 'number one in size,' 'a ragtag group,' and 'a dysfunctional family,' on a solid foundation. He eliminated factionalism and line-up culture stemming from former Kookmin Bank and Housing Bank backgrounds and created a culture emphasizing ability, collaboration, and efficiency. He pushed out Shinhan Financial, which was regarded as the 'Samsung of finance' for its management, and firmly secured the leading bank position. The market capitalization also increased from about 13 trillion KRW at the time of his inauguration to about 21 trillion KRW. There were no rumors that he ousted capable people or failed to nurture successors to hold power for a long time.

It should be at least this level to allow a third or fourth term. Former chairmen Ra Eung-chan and Kim Seung-yu also had such qualifications initially. I hope Chairman Yoon does not follow that path.

In conclusion, the rumors of external pressure from government financial authorities should not be viewed negatively only. Lee Seok-jun, former head of the Office for Government Policy Coordination, is a parachute appointment, but since he has expertise as a financial official rather than being unrelated to finance in the presidential campaign, it is quite acceptable. Of course, it would have been better if he were a financial official who was about to retire or had recently stepped down.

Recent situations are a matter to consider whether they were appropriate somewhere between 'gwanchi' and 'naechi' or not.

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