Special Resolution to Block Reappointments of Financial Holding Company CEOs, but Its Effectiveness Is in Doubt

[Financial News] As a plan to improve the governance of financial companies is set to be announced next month, the hurdle for a third consecutive term for chairmen of Financial Holding Companies (FHCs) is expected to rise further. However, some say the move would still be insufficient to stop "self-reappointments," given that checks on incumbent chairmen do not work properly at shareholder meetings and boardrooms.
According to the financial sector on the 31st, the Plan for Advancing Corporate Governance of Financial Companies is likely to be unveiled as early as next month. That would come eight months after the government formed a governance improvement task force in January and began preparing the plan.
Among the key measures under discussion are raising the threshold for a third term for FHC chairmen to a special resolution at a shareholders' meeting and requiring unanimous consent from all members of the Executive Candidate Recommendation Committee under the board.
The government had initially considered banning a third term for FHC chairmen by law. But it appears to have been burdened by criticism that limiting the term of a private-sector CEO could be unconstitutional and would not align with global standards.
If the approval requirement for reappointment is raised to a special resolution, a reappointment would require the attendance of shareholders holding at least one-third of all issued shares and the approval of at least two-thirds of the shareholders present. That is a higher bar than an ordinary resolution, which requires support from more than half of the shareholders present and at least one-quarter of all issued shares.
The problem is that even with a special resolution in place, it would still be difficult to stop a chairman of an FHC from securing a "self-reappointment." FHC chairmen are already winning reappointment votes by overwhelming margins at shareholder meetings. In fact, Jin Ok-dong, chairman of Shinhan Financial Group Co., Ltd., who was reappointed at this year's March shareholder meeting with an approval rate of 88.0%, Jong-ryong Yim, chairman of Woori Financial Group, with 99.3%, and Bae In-dae, chairman of BNK Financial Group, with 91.9%, all easily cleared the special-resolution threshold of two-thirds, or 66.7%, of shareholders present.
There are also concerns that the unanimous-consent requirement within the Executive Candidate Recommendation Committee would only work if outside directors are truly independent. The committee that selects FHC CEO candidates is usually made up of outside directors. The committees at KB Financial Group Inc., Hana Financial Group Inc. and Woori Financial Group are all composed entirely of outside directors and take part in the CEO appointment process. If the third-term requirement is finalized as "100% consent from the committee," then even one dissenting outside director would cause the reappointment to fail.
However, analysts say that if outside directors at FHCs continue to act as mere rubber stamps, these measures will also be unlikely to have real effect. An analysis of board resolutions from 2022 to 2024 at the eight major FHCs — KB, Shinhan, Hana, Woori, NH Financial Group Inc., BNK Financial Group, JB Financial Group and iM Financial Group Co., Ltd. — found only three dissenting votes out of a total of 885 board agenda items.
A financial sector official said, "Even if measures such as special resolutions are introduced, things may not change much from where they are now," adding, "I think additional safeguards are needed if the goal is to prevent reappointments."
[email protected] Lee Jumi Reporter