[2023 Financial Forum] McKinsey "Board Diversity Important for Financial Firms, Terms Should Be Short"

'The 12th Seoul Asia Financial Forum' Held
'Desirable Corporate Governance and Internal Control Systems in Financial Companies'
Keynote Speech by Guest Mogul McKinsey Partner
'Corporate Governance in Financial Companies: Lessons from Global Advanced Systems'

Jubin Mogul, a McKinsey partner, attended the 12th Seoul Asia Financial Forum held on the 25th at the Chosun Hotel in Jung-gu, Seoul, delivering a keynote speech on the topic "Corporate Governance of Financial Companies: Lessons from Global Advanced Systems." Photo by Jinhyung Kang aymsdream@

"To ensure diversity of thought in the boards of financial companies, it is important to bring in directors from different industries. Designing shorter board terms and rotating board composition are also necessary. Of course, the criteria for board selection must be stringent from the start."

Zubin Mogul, a partner at the global consulting firm McKinsey, stated this on the 25th at the Westin Chosun Hotel in Sogong-dong, Seoul, during the keynote speech titled "Desirable Financial Company Governance and Internal Control Systems" at the 12th Seoul Asia Financial Forum (Financial Company Governance: Lessons from Global Advanced Systems). He is one of McKinsey’s top governance experts and was instrumental in establishing the governance of the Dutch bank ING.

He said, "Progressive banks in Europe pay great attention to shortening board terms and reappointment matters, and they place significant importance on evaluating board members. This ensures the board operates effectively and organizational growth can be expected."

Zubin Mogul added, "On the other hand, in recent years, banks in the United States have faced much criticism. Internal audit teams in U.S. banks did not function properly, which led to a lack of regulatory oversight." He pointed out, "When internal systems have problems like this, the capability to respond effectively to challenges diminishes."

He emphasized, "In Korean financial holding companies as well, outside directors should not merely act as rubber stamps but must ask difficult questions about current issues and raise doubts, thereby voicing stronger opinions. This is a vulnerability that many banks worldwide still experience and has much room for improvement. It is essential for a robust internal control system."

He continued, "The role of the board must change with the times." He explained, "In the past, the board mainly spent time on information analysis or approval procedures, but now it must devote more time to setting management plans and considering more proactive measures. The board should focus on non-financial risks and new topics to lead business expansion or withdrawal."

Zubin Mogul recalled a meeting two years ago with a director from a global top 5 bank. "At that time, the bank had incidents that caused reputational and credit damage, and the director asked McKinsey to evaluate the board and governance. This meant they were looking for internal problems, which I took as a healthy sign that the board was self-checking itself."

His proposal is that shorter board terms, frequent changes in members, and stringent selection criteria will help form an independent and efficient board. Given the broadening range of topics handled by the board, he also urged selecting directors from various fields to embrace diverse thinking.

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