[Why&Next] Four Major Bank Presidents Raised Stock Prices by 110%, Yet Remain on Edge... Why Are They Worried Ahead of Year-End Term Expirations?

Despite a Sharp Rise in Key Performance Metric, Anxiety Remains
Exposure to External Pressure If Terms for Holding Company Chairmen and Outside Directors Are Reformed
Authorities' Influence Likely to Grow with Introduction of 'Clawback' for Bonu

The presidents of the four major commercial banks (KB Kookmin, Shinhan, Hana, and Woori) are facing deep uncertainty as their terms are set to expire at the end of the year. Despite having proven their management capabilities by raising their holding companies’ stock prices by an average of 110% since taking office, it remains unclear whether they will be able to retain their positions. Management uncertainty has reached its peak as financial authorities are targeting the term systems for holding company chairmen and outside directors, and there is a possibility that they may introduce a “clawback” system to reclaim executives’ performance bonuses in the event of financial accidents. Some in the financial sector criticize this situation as a contradiction, saying, “Even though they have successfully managed the key performance indicator—stock price—they are still plagued by management instability.”

The ‘110%’ Report Card for the Four Major Bank Presidents—Praised by Market and Academia

As of May 15, according to sources in the financial sector, stock price management is the most critical key performance indicator (KPI) for bank presidents under the listed holding company system. Since banks account for an overwhelming proportion of holding company earnings, the holding company’s stock price is directly linked to the bank president’s performance evaluation. A senior official at a major commercial bank emphasized the importance of stock price management, saying, “The higher the stock price, the greater my incentive, so bank presidents at listed holding company affiliates have no choice but to put everything into investor relations (IR) activities.”

The report card for the four bank presidents is impressive. From each president’s inauguration to May 13, the average stock price increase for the four major financial holding companies reached 110.3%. Shinhan Financial Group posted the highest increase at 141%, followed by Hana Financial Group (114.9%), Woori Financial Group (103.7%), and KB Financial Group (81.6%). In particular, Jung Sung-hyuk, President of Shinhan Bank, is recognized for achieving overwhelming results thanks to his longer tenure compared to other bank presidents.

Both academia and the securities industry have given high marks to these performances. Seo Ji-yong, a professor at the School of Business Administration at Sangmyung University, commented, “Not only have the holding companies improved their return on equity (ROE), normalized their price-to-book ratios (PBR), and expanded dividends and share buybacks, but with stock price increases in the 80% range, even after considering the benefits of government value-up (corporate value enhancement) policies, their management performance would be rated ‘excellent’ or higher.” Kim Ji-young, a researcher at Kyobo Securities, also gave a positive outlook in a report, saying, “Stable capital management and active shareholder return policies are driving the rise in stock prices.”

Bank Presidents on Edge Over Government-Led Governance Reform—Will the ‘Political Umbrella’ Disappear?

Sung-Hyuk Jung, President of Shinhan Bank. Shinhan Bank

The main reason bank presidents are not celebrating their strong results is the soon-to-be-announced governance reform plan for financial holding companies. The plan reportedly includes stricter regulations on the terms of holding company chairmen and outside directors, as well as the introduction of a clawback system.

Both academia and the financial sector agree that the issue of tenure restrictions for holding company chairmen and outside directors is directly relevant to bank presidents. Since all four major banks are 100% subsidiaries of their financial holding companies, the holding company chairman exercises absolute influence over the appointment and dismissal of bank presidents. If the chairman’s position is shaken, the bank president’s job security is naturally threatened. In particular, if the authority of the chairman and the board is weakened by financial regulatory reforms, bank presidents will find themselves directly exposed to external pressures from regulators, politicians, and public opinion, without the protection of their former “political umbrella.” In fact, many in the financial sector expect the reform plan to include measures such as legally limiting chairmen to three consecutive terms and raising the quorum needed for special resolutions. As the very foundation of governance changes, the anxiety among bank presidents is inevitably reaching its peak.

Kim Yong-jin, a professor at Sogang University’s School of Business Administration, analyzed, “If banks were listed on the stock market with independent boards appointing presidents, the fate of bank presidents wouldn’t be tied to the holding company chairman, but Korea’s financial sector does not have such a structure. In reality, the holding company chairman holds the power to appoint and dismiss bank presidents, so if the governance of the holding company becomes unstable, the bank’s own governance will inevitably be shaken as well.”

Kim Sang-bong, a professor of economics at Hansung University, also pointed out, “Most commercial banks have formed internal factions through mergers and acquisitions (M&A), and there has been a tendency to allow holding company chairmen to remain in power for extended periods. Even if the financial authorities and politicians criticize them for ‘entrenchment’ or being ‘antiques,’ much of it is self-inflicted.”

Yonhap News

Concerns Over Clawback Introduction—“Stronger Qualitative Evaluation by Authorities… Consumer Protection Over Performance”

There are also significant concerns about the clawback system, another key element of the governance reform plan. This is because Lee Chan-jin, Governor of the Financial Supervisory Service, directly raised the need for its introduction in the National Assembly last year, demonstrating the regulator’s strong determination.

Some are optimistic, reasoning that as long as no financial accidents occur, there should be no problem; but those on the ground have a different view. Even with robust internal controls, it is nearly impossible in reality to prevent all financial accidents, such as hacking or individual employee misconduct. If the clawback system is implemented, bank presidents will face not only the risk of having to return their performance bonuses, but also the authorities’ strong qualitative evaluation standard of “financial consumer protection reputation.” This is likely to become a key indicator directly impacting job security and reappointment.

Professor Seo forecast, “As the Financial Supervisory Service is driving this initiative strongly, the selection process for future bank presidents will scrutinize past accident histories and attitudes toward consumer protection much more meticulously than before. These factors will become very important qualitative evaluation items in the review process for both appointment and reappointment of bank presidents.” He added, “Stock price and performance largely reflect industry-wide trends, so they will be used only as minor criteria, not as decisive factors.”

Bank Sector: “We’ve Proven Ourselves, Yet It’s a Contradiction” vs. Authorities: “No Exemption From Public Responsibility”

The banking sector is protesting, claiming it is a “management contradiction” that they are not receiving fair evaluations despite having proven their abilities with clear stock price gains. On the other hand, the government and financial authorities argue that the public outcry over consumer losses and financial accidents—overshadowed by record bank profits—cannot be ignored. They believe that sharp political criticism of the tradition of long-term holding company chairmanship, as well as calls to strengthen banks’ responsibilities as public institutions, must also be considered.

In this context, President Lee Jae-myung posted on X (formerly Twitter) the previous day, stating, “Finance may operate as a private business, but since it is a quasi-public enterprise based on the state’s currency issuance power and monopolistic licensing, it must fulfill its public responsibilities.”

Many in the financial sector interpreted this remark as being just as weighty as former President Yoon Suk-yeol’s reference to banks as a “public good,” noting, “There is now a climate in which it is difficult to avoid responsibility based solely on stock price or performance figures.”

There are also growing calls for fundamental reform of banks’ organizational structure. Jo Myung-hyun, a professor at Korea University and former head of the Korea Corporate Governance Service, pointed out, “If financial companies had operated their own CEO succession plans effectively, the process for developing the next generation of leaders would have become more sophisticated. If boards (under a single-term system) worked with conviction and management refrained from seeking reappointment, the logic of ‘raising the stock price is enough’ would lose its validity.” He added, “Given that current high stock prices are based not just on management effort but also on an oligopolistic industry structure and interest income, banks themselves need to reflect on what real management innovation should be.”

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