Financial Holding Company Chair Reappointment Rules to Be Tightened: Third Consecutive Term Requires at Least 50% of Issued Shares Represented and 75% Approval from Shareholders Present

[Financial News] Financial authorities are pursuing a plan to tighten voting requirements for the executive candidate recommendation committee and shareholders’ meeting in stages, depending on how many times a financial holding company chair has been reappointed, to curb lengthy tenures. Instead of the previously considered ‘legal ban on a third consecutive term,’ they have settled on raising the approval thresholds to make such long tenures difficult in practice.
According to financial and political circles, the Financial Services Commission met on the 2nd with Democratic Party of Korea lawmakers on the National Assembly’s National Policy Committee and presented a plan to improve financial companies’ corporate governance, centered on these measures.
The core of the reform plan is to progressively tighten the legitimacy requirements for the appointment process and the requirements for shareholder approval as the number of reappointments of a financial holding company chair increases. For an initial appointment, at least two-thirds of the executive candidate recommendation committee members must vote in favor. At the shareholders’ meeting, at least one-quarter of all issued shares must be represented, and a majority of the voting rights held by shareholders present must vote in favor.
For a reappointment, the committee approval threshold rises to at least three-quarters, and the shareholders’ meeting must also meet the stricter requirements for a special resolution rather than an ordinary resolution: at least one-third of all issued shares must be represented, and at least two-thirds of the voting rights held by shareholders present must vote in favor. For a third consecutive term, the committee approval threshold remains at at least three-quarters, while the bar at the shareholders’ meeting rises substantially: the appointment is confirmed only if at least half of all issued shares are represented and at least three-quarters of the voting rights held by shareholders present vote in favor.
Financial authorities initially discussed a plan to ban a third consecutive term outright by law. However, amid concerns within the ruling party that this could be unconstitutional and that it would be difficult to find legislative precedents overseas, they reportedly adjusted the level of regulation by opting to strengthen voting requirements instead.
The reform plan also includes a range of checks to establish a transparent governance structure. It provides for transparent disclosure not only of chair candidates’ management performance but also of social controversies, including their financial incident histories, so that shareholders can make objective assessments. It also requires the chair of the executive candidate recommendation committee to explain the reasons for recommending a chair candidate directly at the shareholders’ meeting and to provide shareholders with a confirmation form signed by every committee member.
The plan also calls for transparently disclosing the reasons for and details of any one-on-one contact an incumbent chair has with a committee member during the process of selecting the next chair. In addition, authorities are considering including the committee chair among those subject to the responsibility map requirements.
Based on the reform plan, financial authorities and the ruling party intend to hold further consultations and communicate with the opposition before finalizing and announcing a plan to advance corporate governance, as early as the middle of this month. Many of the plan’s detailed measures are expected to be introduced later through amendments to the Act on Corporate Governance of Financial Companies and its enforcement decree.


[email protected] Park Ji-hyun Reporter