As the terms of the leaders of South Korea's five major banks are set to expire at the end of the year, attention is turning to whether the role of the banks' nomination committees will be expanded in the selection process. The Financial Supervisory Service (FSS) has publicly pointed out that the role of these committees is limited in the succession procedures for CEOs of subsidiaries led by financial holding companies.
On September 16, FSS Chairman Lee Chan-jin stated during an executive meeting that, "The succession procedures for subsidiary CEOs established by most holding company nomination committees are inadequate, and the role of the subsidiary nomination committees is also limited."
This criticism is particularly focused on the succession processes for subsidiary CEOs, including bank presidents, rather than the holding company chairpersons. The terms of the presidents of KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup banks all end on December 31.
The FSS is primarily concerned with whether the nomination committees are effectively involved in the management, evaluation, and narrowing down of candidates for bank president positions. Best practices in governance suggest that holding companies should share the status and changes of the candidate pool for bank presidents with the nomination committees and grant them the authority to recommend candidates or provide input during the evaluation process.
Currently, the FSS has found that such sharing of candidate information or granting of recommendation authority is limited to some holding companies.
There are also differences in the actual operational methods among financial holding companies. Hana Financial specifies in its annual report that the holding company receives the list of CEO candidates recommended by the Hana Bank nomination committee. Although NH Nonghyup Financial does not explicitly outline this process in its annual report, during the selection of NH Nonghyup Bank President Kang Tae-young in 2024, the bank's nomination committee provided the status of candidates and received recommendations, with the committee chair participating in candidate interviews to offer input.
In contrast, the governance reports and internal regulations of KB, Shinhan, and Woori Financial do not clearly indicate that the bank nomination committees directly recommend or participate in the evaluation of candidates before the final selection by the holding companies. However, Woori Bank has stated that the nomination committee has been granted the authority to recommend candidates.
As a result, the upcoming selection of the five major bank presidents at the end of this year is expected to serve as a test of how much influence the nomination committees can exert in the actual selection process. With the financial authorities' proposals for governance improvements delayed, the FSS is taking the initiative to strengthen oversight of the succession procedures ahead of the year-end selections.
A financial industry source noted, "Given that the FSS has publicly pointed out the limited role of the bank nomination committees, it is highly likely that each financial holding company will consider strengthening the powers of these committees during the year-end selection process. In light of the announced plans for enhanced oversight, it will be difficult to avoid supplementing related procedures."
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.