Ra wins Shinhan power game

By Kim Jae-won

As expected at any Korean firm, Shinhan Financial Group, the most profitable financial services firm, opted for stability Tuesday, backing its Chairman Ra Eung-chan in his confrontation with key lieutenant Shin Sang-hoon, the firm’s president.

In a board of directors’ meeting, Shinhan Financial decided to suspend Shin from his duties.

The 12-member board voted 10-1 for the suspension.

One Korean-Japanese director abstained, while Shin found himself to be the only one to vote against the move.

“We’ve heard arguments from both sides, but concluded that the boardroom is not in a position to verify the truth,” Chun Sung-bin, the chairwoman of the board and a professor at Sogang University, said in a press conference held at the group’s main office in downtown Seoul.

“However, we decided it was impossible for President Shin to continue his duties because of market concerns, so we decided to suspend him from his duties.”

Chun added the suspension also means that the boardroom will await a court decision before taking further action. Shinhan Bank, the group’s flagship, filed a criminal complaint against Shin, claiming he committed a breach of trust by allowing loans to his relatives, and embezzled bank funds, while in charge of the bank.

With the decision, Chairman Ra has gained momentum in the power struggle.

“Boardroom members backed Ra. It may be difficult for Shin to take back his position even if he is cleared of the allegations of embezzlement,” Hwang Seok-kyu, an analyst from Kyobo Securities, said.

Hwang said it could be a few months before Shinhan can regain the trust of consumers because the internal feud has been _ and still is _ big enough to hurt its image and stock price.

The board meeting had been delayed due to fierce opposition from Japan’s resident outside directors and shareholders, who have a big say in the group’s affairs, as the bank was created in 1982 with investments from a group of Korean-Japanese businessmen residing there. They have a combined 17 percent stake in the group.

Board members looked nervous when they first entered Shinhan’s main office ahead of the meeting. Chun arrived at the office around 1:00 p.m. wearing a blue two-piece suit. She looked pale, and said she had not decided yet whom she would vote for.

“I will listen to opinions from both sides and will decide what to do,” the chairwoman, recommended by Ra, said.

Other directors also kept quiet, and walked through the photo line surrounded by scores of reporters and photographers.

Shinhan had boasted of a troika leadership through the three top executives _ Chairman Ra, President Shin and Shinhan Bank CEO Lee Baek-soon, but now this is dissolving as Ra and Lee battle against Shin.

Ra and Lee fired the opening salvo when the latter filed a complaint with the prosecutors’ office earlier this month _ apparently approved by Ra _ against Shin over the alleged illegal lending of 95 billion won to his relatives’ firm, and the embezzlement of 1.5 billion won.

Shin argued his innocence, and counterattacked Ra at the board meeting saying Ra had also engaged in embezzlement.

The fight became even fiercer as both sides declined to compromise. Shin prepared documents, which are supposed to prove that Ra also embezzled the group’s finances. He was accompanied by his two former secretaries, who were supposed to testify about Ra’s embezzlement and confirm Shin’s innocence of the alleged illegal lending. Ra also came to the office with a thick wad of documents supposedly attesting to Shin’s misdeeds.

Hundreds of reporters, camera crews and broadcasting staff filled the press room at Shinhan’s headquarters, pointing to the local media’s interest in the goings on at the country’s third-largest financial group nation.

Shinhan employees were looking around the lobby carefully watching what was happening at their workplace.

The top three officials ― Ra, Lee and Shin ― scurried to win over four outside directors and shareholders living in Japan by flying to Nagoya last week.

The internal strife deepened as speculation rose that the move to oust Shin may have been engineered by Ra, who is under investigation by the Financial Supervisory Service over allegations that he violated the real-name financial transaction law years ago.

Ra reportedly suspects Shin of prodding lawmakers into bringing up the issue again to spur the regulator to launch the probe.