Lee Chan-jin, FSS governor, again stresses transparency in appointing financial holding companies’ subsidiary CEOs

[Financial News] Lee Chan-jin of the Financial Supervisory Service again raised concerns about the corporate governance of financial holding companies. With many major financial holding companies set to appoint subsidiary chief executive officers (CEOs) toward the end of the year, the point is that holding company chairmen should not exercise excessive appointment powers. The Financial Supervisory Service plans to examine whether the entire management succession process, from selecting candidates to vetting and evaluation, was conducted fairly. As the FSS has pointed to the concentration of subsidiary appointment powers in financial holding company chairmen and the merely formal role of boards in providing checks, the industry is watching closely to see whether this year-end’s appointments will be based primarily on management ability.
According to financial authorities on the 26th, Governor Lee urged participants at the FSS vice governors’ meeting that morning to check the fairness and transparency of the management succession process as soon as the procedures for appointing financial holding companies’ subsidiary CEOs are complete. He is said to have issued the instruction while again raising concerns about problems in those succession procedures, which had recently been brought up during a National Policy Committee audit at the National Assembly.
Governor Lee is said to have said, “The procedures, from selecting the candidate pool through vetting and evaluation, must be conducted transparently and fairly according to criteria established in advance,” and, “Please ensure the responsible departments thoroughly review them afterward as well.” The instruction was to check even after subsidiary CEO appointments are complete whether the process was conducted in keeping with the intent of measures to improve financial holding company governance and with best practices.
The FSS has previously made clear its determination to address the excessive concentration of authority to appoint subsidiary CEOs in financial holding company chairmen. In particular, it said it would correct the problem of people being appointed as subsidiary CEOs without their management abilities being vetted, simply because of their personal ties to a holding company chairman.
Financial holding companies are proceeding with subsidiary CEO appointments ahead of their regular year-end personnel reshuffles. Hana Financial Group Inc. is set to finalize its shortlist today of CEO candidates for six subsidiaries, including Hana Bank and subsidiaries in securities, cards, capital, life insurance and savings banking. NH Nonghyup Financial Group, which began its succession process last month, is also expected to finalize its longlist of subsidiary CEO candidates on the 28th.
Governor Lee also said during the National Policy Committee’s audit on the 19th that he would review banking-sector appointment procedures across the board to check whether governance improvements were actually being implemented. The FSS will also examine, after the appointment process is complete, whether internal control systems worked properly and whether authority was appropriately divided between chairmen and boards, among other matters.
Governor Lee is scheduled to hold a closed-door meeting on the 28th with the board chairs of major financial holding companies and personally urge them to strengthen the transparency and fairness of subsidiary CEO appointment procedures. The Financial Services Commission is also reportedly planning to prepare the government’s proposal to improve financial holding company governance and pursue consultations between the government and ruling party. With the FSS set to begin post-appointment reviews with this year-end’s appointments, separately from discussions on legislative amendments, oversight of financial holding company CEO succession procedures is expected to intensify.
Meanwhile, the Financial Services Commission is expected to prepare, in early November, the long-delayed government proposal to improve financial holding company governance and announce it soon after consultations between the government and ruling party.
[email protected] Park Mun-su Reporter