Shinhan’s top 3 may face confidence vote

By Kim Jae-kyoung, Kim Jae-won

The ball is now back in the court of the board of directors of Shinhan Financial Group as Korean-Japanese shareholders decided Thursday to leave a decision on the group’s internal feud up to at an emergency shareholder meeting at the Marriot Hotel in Nagoya, Japan.

But with Chairman Ra Eung-chan, Shinhan Bank CEO Lee Baek-soon and group CEO Shin Sang-hoon failing to garner support from the Korean-Japanese, the case is not likely to be resolved anytime soon. Instead, all three are likely to face a confidence vote at the meeting, expected to be held early next week.

If the scenario of the three stepping down at the same time actually happens, the group will face its biggest crisis since it was established in 1982, due to a collapse of its governance structure and a management vacuum.

The group said that Korean-Japanese shareholders and outside directors, who own a 17-percent stake, have agreed to follow any boardroom decision to solve the internal feud triggered by the bank’s filing of criminal charges against CEO Shin for his alleged involvement in embezzlement and inappropriate lending.

“Korean-Japanese shareholders asked us to solve the Shin case as soon as possible. They agreed to hand over authority to the boardroom on the issue,” Wi Sung-ho, vice president of the group, told reporters after the shareholders’ meeting.

“We may call the boardroom members earlier next week to discuss the problem,” a spokesman for Shinhan, said.

The decision to leave the matter entirely to the board came as shareholders are concerned that unless the issue is resolved internally, the government will step in and they will lose the initiative.

Who should be responsible?

However, the Korean-Japanese were widely split over who should be held accountable for the dispute.

“Shareholders at the meeting have different views. Some said that I have to take responsibility, while others claim that Lee should be responsible,” Shin told The Korea Times over the phone from Japan after the meeting.

“However, many of them shared the view that all of us should be held accountable for the internal dispute and step down at the same time,” he added. “Some of them insisted that the board should hold a confidence vote in all of us at the board meeting.”

The three flew to Nagoya to give a briefing about the internal feud triggered by the bank’s criminal filing against Shin.

Ra and Lee gave a full explanation about why they referred Shin to the prosecution, while Shin told his side of the story, denying all charges filed against him and accusing his boss Ra and his supporters of making unfounded allegations.

Shin proposed the establishment of an emergency committee to end the dispute as early as possible to minimize damage to the financial group.

Industry watchers said the shareholders may be afraid of an additional drop in share price, so they asked the group to call the meeting early. Shinhan shareholders saw the group’s market capitalization lose more than 1 trillion won over the last week following the accusations.

Some said shareholders showed their trust for Ra by again handing over authority to the boardroom. He asked shareholders to support him vowing to conclude the matter as soon as possible, a local news agency reported.

“I will definitely solve this problem if you trust me,” Yonhap News Agency reported, quoting Ra.

Korean-Japanese hold the key

The four Korean-Japanese outside directors are the key factor in deciding the fate of Shin at the emergency meeting.

Korean-Japanese shareholders are the largest followed by BNP Paribas and the National Pension Service.

Shinhan’s board consists of four internal directors ― Ra, Shin, Lee and non-standing director Ryu Shi-yul ― and eight outside directors, including the four Korean-Japanese. To approve Shin’s dismissal, at least seven out of the 12 should vote for it.

Therefore, Korea-Japanese shareholders’ power will be decisive. If Shin and the four Korean-Japanese outside directors vote against dismissal, the move can be rejected if just one other person opposes it at the meeting.

Analysts said that the meeting will affect Shinhan’s governance system, which was sustained by the troika.

“If Shin is ousted, he will be forced to retire. However, if he survives, then, Ra and Lee’s leaderships will be hurt,” a local analyst said.