Shinhan’s internal feud takes new turn

Korean-Japanese shareholders set against dismissal of Shin

By Kang Seung-woo

The internal feuding at Shinhan Financial Group is taking a new turn as one of four Korean-Japanese outside directors ruled out the possibility of dismissing CEO Shin Sang-hoon, hinting that they will all vote against the group’s move to oust him.

The outside director residing in Japan made an unscheduled visit to Seoul Tuesday to meet Chairman Ra Eung-chang. At a meeting with reporters following talks with Ra, he said that the internal fighting is not likely to end up in Shin’s dismissal.

“The board meeting can take place even before the prosecution completes its investigation,” Cheong Hang-nam, an adviser of the Korea Chamber of Commerce and Industry in Japan, said in Japanese.

“If the group holds a board meeting and contacts me, I will participate any time,” he added. “But I do not think the board of directors will dismiss Shin.”

With the sudden visit by the outside director, the group is expected to hold a board meeting as early as Friday, but the feuding is likely to unfold in an even more unexpected way as Chung’s remarks could tip the balance of power in favor of Shin.

Shinhan Bank CEO Lee Baek-soon, who referred Shin to the prosecution, has been busy trying to garner the support of Korean-Japanese shareholders, as they hold the casting vote to dismiss him.

Lee flew to Japan Monday, his second visit in three days, to meet with Korean-Japanese shareholders, who have a combined ownership of 17 percent, but he did not get the answers he wanted, after failing to finalize a date for a meeting.

Lee convinced some of the Korean-Japanese outside directors to participate in the meeting. Yet it is still uncertain whether the group will put Shin’s dismissal case on the agenda as many of the Korean-Japanese shareholders are still reluctant to reach an early conclusion on Shin’s fate before the prosecution completes the investigation.

Shinhan plans to hold a board meeting as soon as possible to repair its damaged reputation from legal action against its former boss.

“We will provide an additional explanation to the outside directors in a bid to schedule the board meeting soon,” an official of the financial group.

Shinhan Bank filed a complaint with the persecution against Shin and six others executives for alleged breach of duty and embezzlement Thursday, and the prosecution launched on investigation Friday.

The nation’s third-largest lender said it recently found that Shin had extended a combined 95 billion won ($81.13 million) to three companies involving one of his relatives between 2003 and 2006 during his reign. Shin was also suspected of embezzling about 1.5 billion won.

Korean-Japanese shareholders, four of whom are outside directors, held an emergency meeting on Friday and reached an agreement that the board meeting should be delayed until the prosecution completes its investigation.

The board of the financial holding firm comprises 12 directors – four internal directors including its Chairman Ra Eung-chan, Lee and Shin and eight outside ones. To oust Shin, at least seven out of the 12 should vote for it.

FSS to begin Ra probe

Amid the internal feuding at the nation’s largest financial group, the nation’s financial watchdog kicked off an investigation into Ra for his violation of the real-name financial transaction law years ago.

“The watchdog has launched an investigation into the allegation,” Financial Supervisory Service Governor Kim Jong-chang said Tuesday.

“It will be difficult to predict how long the fact-finding will take, but the watchdog will continue it as planned, irrespective of circumstances.”

The 71-year-old was investigated by the prosecution last year after transferring 5 billion won ($4.18 million) in 2007 to Park Yeon-cha, a former CEO of shoemaker Taekwang, because the money was withdrawn from an account registered to another person.

While any suspicious actions by Ra were left undetermined, Park is now serving a prison term for bribing the late former President Roh Moo-hyun and his family, putting the FSS under fire.

Opposition parties claim that the FSS did not properly investigate allegations of Ra's law violation and that Ra was protected by the inner circle of President Lee Myung-bak.