Bo-eun leads the digital content team. She has covered foreign affairs, North Korea, tech, economy and gender issues at The Korea Times. She did a short stint at the South China Morning Post in Hong Kong, where she obtained a new perspective on news production and life. Small sources of joy for her are lounging in the sun, having a good latte and swimming.
Shinhan facing calls to replace Korean-Japanese directors
By Kim Bo-eun
Shinhan Financial Group and Shinhan Bank's headquarters in central Seoul. / Korea Times file
By Kim Bo-eun
Shinhan Financial Group is facing repeated calls to improve the diversity and expertise of its outside directors, of which ethnic Koreans with Japanese nationality comprise 36 percent.
Based on a comprehensive inspection of the financial group last year, the Financial Supervisory Service (FSS) directed Shinhan last month to make the changes based on corporate governance regulations.
The regulations state that financial firms' outside directors, based on expertise and diversity, should be able to keep the company's management in check. More detailed regulations state that board members should not share a certain common background or represent the interests of certain occupations.
Currently, four of Shinhan's 10 outside directors are Korean-Japanese. They are CYS CEO Choi Kyong-rok, Fedora CEO Jin Hyun-duk, Taisei Group Chairman Park An-soon and Primer Korea CEO Yuki Hirakawa.
The regulator said the outside directors' expertise was focused on certain sectors such as entertainment that are irrelevant to the financial sector and therefore could limit diversity in presenting views within the board.
The authority also said the outside directors showed only minimal input at board meetings, failing to carry out their role to keep management in check.
Based on this, the FSS advised the group to improve transparency in forwarding outside director candidates. However, following the authority's directions is voluntary.
This is not the first time the FSS has taken issue with the composition of Shinhan group's board. Shinhan has offered four of the 10 positions to Korean-Japanese for the past decade.
“Because Shinhan Bank was established with the capital of Japanese shareholders, we cannot disregard this,” a Shinhan Financial Group official said.
Its establishment was led by the Korean-Japanese Lee Hee-gun in 1982, with investments by ethnic Koreans living in Japan. Korean-Japanese shareholders still collectively account for 17 percent of Shinhan group's shares.
Regarding the expertise of the outside directors, the Shinhan official said: “While not of the financial sector, they do hold expertise in management, accounting and legal issues.”
Shinhan does not appear to have any issue with the outside directors, but the official said: "The group will seek to complement the areas in which it can."
Based on Affinity Equity Partners and Baring Private Equity Asia becoming shareholders of Shinhan group this year, the percentage of Korean-Japanese outside directors will likely fall, as the new shareholders will each forward a candidate for one outside director. The new members will join the board after the general shareholder meeting next March.
Among the four Korean-Japanese directors, Choi Kyong-rok was involved in a controversy earlier this year after he inherited Shinhan shares from his father Choi Young-seok who died in October 2019. The late Choi was an outside director of the financial group and its banking unit. The inheritance sparked a dispute as it is unusual for a son to take over his father's position as an outside director.