Bankers deal with Blue House blues
By Kim Jae-won
There is an old Chinese saying that a flower doesn’t last more than 10 days and political power doesn’t go beyond 10 years. This doesn’t come close to describing the precarious nature of authority in Korea where political influence goes sour faster than old milk.
Battered by a slew of corruption scandals and public outcries over economic policies and controversial issues like U.S. beef imports, the lame-duck Lee Myung-bak government is beginning to inspire more ridicule than fear in political and business circles.
This also explains the uneasiness at the executive suites of Korean banking heavyweights like KB Financial, Woori Financial and the Korea Development Bank (KDB), all headed by CEOs with close ties to Cheong Wa Dae.
With Lee as popular as gout these days, it remains to be seen whether the banking CEOs will be taken as seriously as they were in past years. The Korean government traditionally holds significant influence in naming the heads of banking groups, a process critics sarcastically describe as “parachuting.” These CEOs command enormous respect in the earlier part of any administration, with strong political backing allowing them to be assertive and bold with their business decisions.
However, with the clock ticking toward the December presidential elections, the CEOs now find their influence aging faster than dog years.
“It is inevitable that CEOs in the companies may be affected by political change in the coming months. Some of them may lose their seats, while others will struggle to keep their influence,” said a financial expert on condition of anonymity.
Kim Seung-yu, the former chairman of the Hana Financial Group and close confidant of Lee, has freed himself from all the second-guessing and backtalking by retiring and passing the management helm to current Chairman Kim Jung-tai.
Others, in contrast, are just hoping to survive the heightened election year intensity and manage a peaceful exit.
KB Financial Chairman Euh Yoon-dae, a longtime bureaucrat, noted scholar and former Korea University President, always seemed to have the ear of President Lee.
Euh taking the management helm of KB in July 2010 was a process close to a coronation.
While Euh had competition in the form of former KB interim Chairman Kang Chung-won, the latter gave up his bid for the chairmanship following a Financial Supervisory Service (FSS) investigation on him and his aides over some questionable business practices.
While the FSS investigation was far from groundless, critics chirped that the timing of the probe was too convenient.
Euh’s term ends in July 2013.
Euh has pushed an aggressive restructuring process at KB, shaving more than 3,000 staff members from payrolls and realigning the group’s business units to make it quicker on its feet.
Woori Financial Group Chairman Lee Pal-seung is also known to be close to Lee since the president’s days as Seoul mayor. But the government’s failed attempts at divesting its stake in the banking groups have made the relationship between the two somewhat awkward.
The government owns 57 percent of Woori through the Korea Deposit Insurance Corp.
(KDIC). It tried to sell its holdings twice in 2010 and last year, but failed due to lack of investor interest.
Only three local private equity funds (PEFs) — Vogo, MBK and T-Stone — showed interest in buying the company, but the financial authorities refused to sell Woori to them, saying if PEFs acquire Woori, it could hurt the Korean financial industry in the long-term.
Woori Chairman Lee, who has been heading the group since 2008, is eager to push the privatization plan, but is struggling to generate any traction. He tried touting corporate giants like KT and POSCO for larger investments, only to be given the coldshoulder.
Will KDB’s Kang pull off IPO?
KDB Financial Chairman Kang Man-soo, who served as the first finance minister under the Lee administration, is regarded as the chief architect of President Lee’s ruthlessly growth-first economic policies dubbed as “MBnomics.” Kang is currently pushing the group’s privatization process and plans for an initial public offering (IPO) by October. But market sources believe that the process will likely drag on to the next administration.