What is Shinhan Financial chiefs exit strategy?

Ra may make announcement on his future at board of directors' meeting on Saturday

By Kang Seung-woo

Over the past week, Shinhan Financial Group Chairman Ra Eung-chan may have been spending most of his time juggling two options for his future ― waiting for the announcement from the financial regulator regarding punitive measures or just stepping down voluntarily before it.

For Ra, the first option could be better but riskier as he may be forced to forfeit the chairmanship if the Financial Supervisory Service (FSS), hands down the heaviest penalty, ending his 40-year banking career in disgrace.

It seems that Ra has opted for the first option as he went to Japan over the weekend to meet Korea-Japanese shareholders, a move that is widely seen as an attempt to secure their support in order to maintain his chairmanship.

On the contrary, there is growing speculation that the 71-year old will seek to resign as Ra was near defeated after a meeting Sunday with the Korean-Japanese shareholders in Tokyo. Ra returned home Monday, two days earlier than expected.

There is speculation that Ra will express his intention to resign at a board of directors’ meeting scheduled for Saturday. A Shinhan spokesman denied that Ra would resign soon.

According to industry sources, he met 11 shareholders, including six former and current outside directors, to discuss the group’s recent scandals, and possibly the next chairmanship, but the meeting did not exactly lead to the results as he had hoped.

“I did not talk about (the next chairman),” Ra told reporters on his arrival. He has been to overseas investor relations (IR) sessions, which put him in another spotlight as he failed to show up for the scheduled parliamentary audit.

Ra also said that he will make a statement during the board meeting on Saturday.

“We cannot officially confirm what they talked about,” an official of the financial holding firm said.

Despite the denial, the market is closely watching him given that the recent hoopala surrounding him might lead to his exit from the position.

The FSS, which was slammed for failing to pursue Ra’s irregularities even though they were uncovered last year in May, is set to impose severe punitive measures against him for violating the Real Name Financial Transaction Law.

He opened bank accounts under borrowed names and transferred 5 billion won to Park Yeon-cha, a Busan-based businessman and a confidant of late former President Roh Moo-hyun, through the accounts.

In addition, many of the Korean-Japanese shareholders are pressing Ra and the two other chief executives ― group President Shin Sang-hoon and Shinhan Bank CEO Lee Baek-soon ― to resign. Shin Sang-hoon has been suspended from duties for alleged embezzlement and breach of trust, while Lee is also involved in a legal dispute for defamation.

Ultimately, Ra has fallen out of favor with the shareholders of the financial services firm.

Two weeks ago, a total of 130 shareholders, including the group’s four outside directors, held a meeting in Osaka, Japan and reached an agreement to sack all three and select new management as soon as possible to put the group back on track.

The regulator’s toughest actions include dismissal, suspension from duty and a disciplinary warning. A person who is sanctioned by any of the three measures is banned from holding an executive post at a financial company for three to five years. Given that the violation of the real name law is considered a serious offense, chances are that he will be suspended from duty at the very least.

However, the FSS is still considering the severity of the punishment it will hand down in its disciplinary committee meeting, scheduled for Nov. 4.

“We have not finalized penalties on Ra yet,” an official of the FSS said.

“I am not sure if we will be able to determine the punitive actions on that day.”

Meanwhile, adding to the growing speculation of Ra’s future is the question of who will take over him which remains uncertain and could put Shinhan in a position to face a possible management vacuum.

“The topic of the upcoming board meeting is expected to be about Ra’s replacement,” a Korean-Japanese outside director told the Seoul Economic Daily, a sister paper of The Korea Times, last week.

“I am also in contact with the head of the board of directors, but the board has failed to come up with definite candidates.”

Another outside director said, “We have not touched upon a future candidate.”