Financial authorities appear to be preparing for sweeping reforms for outside directors of financial groups just as they are scheduled to hold their annual shareholders meetings this month, industry sources said Friday.The topics to be discussed at the meeting will include whether to extend the term tenures of outside directors.The law stipulates that an outside director’s term can last for only two years, but can be extended repeatedly for one or two more years, while not exceeding six years overall.A total of 68 percent of outside directors at eight financial groups — KB, Shinhan, Hana, Woori, NongHyup, BNK, DGB and JB — will see their terms expire in March.Under the circumstances, the shareholders’ meetings this year are considered timely for the financial regulators to revamp rules on outside directors as the government looks to finally tackle the “Korea discount,” sources noted.The Korea discount refers to a phenomenon in Seoul’s stock market where its equities are undervalued or have higher-risk premiums compared to global peers.Opaque corporate governance is one of the key factors that helped create the Korea discount.Correspondingly, outside directors of the listed firms have generally been accused of being mere rubber stampers, unilaterally endorsing the board of directors, instead of assessing management decisions fairly and objectively.“The current policies on outside directors so far have not been very successful in improving the transparency of firms, and not extending the terms of current outside directors may be the right step to begin carrying out reforms,” said Ha Joon-kyung, a Hanyang University economics professor.
The corporate management reports from the five biggest financial groups — KB, Shinhan, Hana, Woori and NongHyup — showed that outside directors at both Shinhan and Woori voted against management decisions only once in 2022 while those of the three other firms voted fully in support regarding the decisions made by their respective management.Some industry watchers think that a considerable number of outside directors see their jobs as simply a way to obtain an income to help them in retirement.They thus find it tough to raise objections against management out of fear of not having their tenures renewed after their first terms end.Of the eight aforementioned financial groups including BNK, DGB and JB, 37 percent of their outside directors are active scholars.Of all the outside directors, 22 percent are retired financial executives and another 12 percent are retired financial bureaucrats.The annual salaries paid at the five largest financial groups averaged 68.96 million won ($51,000) in 2022. KB paid the highest amount at 88.14 million won, followed by Shinhan at 78.54 million won, Hana at 69.15 million won, Woori at 63.7 million won and NongHyup at 45.3 million won.The Financial Supervisory Service (FSS) asked the eight groups to submit plans to improve transparency in their governance structures, such as CEO selection processes, 카지노사이트 by mid-March.