KB board members refuse to quit

By Chung Ah-young

KB Financial Group’s board members have ignored the financial regulator’s mounting call for them to step down.

The board members have been under growing pressure to take responsibility for recent managerial conflicts within the group over the change of the bank’s main computer system.

They were expected to express their position about the regulator’s demand at a board meeting convened Wednesday.

However, board Chairman Lee Kyung-jae and other members, emerging from the meeting, said they did not discuss the issue at all, refusing to reply to reporters’ question about their positions.

“We didn’t discuss that matter (whether they will remain or step down) at the meeting,” said Kim Young-jin, one of nine outside directors.

The Financial Services Commission (FSC) has indicated that their resignation is one of the key conditions for its approval of KB’s takeover of LIG Insurance.

Former KB Financial Chairman Lim Young-rok and former KB Kookmin Bank CEO Lee Kun-ho ended up being removed after a months-long dispute over the change in the bank’s computer system.

The board members have been under fire for their failure in mediating the row before it worsened and created a leadership vacuum.

FSC Chairman Shin Je-yoon said the KB scandal reveals the problems of its outside directors, calling for management structure reform. “Reforming the board system will be core to improving the management structure,” Shin said in the recent audit at the National Assembly.

FSC Vice Chairman Jeong Chan-woo also turned up the heat, saying at a recent seminar that KB Financial’s board is very much responsible for the latest scandal. “KB Financial should secure a management structure that can be checked by the board members when management makes a wrong decision,” he said.

They have taken a firm stance against the pressure to step down. The terms of six of the members will expire in March.

The board decided to launch a task force by March next year to reform its management structure.

It also appointed KB Financial Chairman Yoon Jong-kyoo as CEO of Kookmin Bank. The board decided that Yoon will be paid only for the chairmanship although he will assume the bank’s CEO post.

Board members plan to entrust the project to a consulting firm and receive the results by the end of March.

They agreed to adopt an internal promotion program for the CEO post to prevent government “parachute” appointments and power struggles within the company.

The labor union of Kookmin Bank, its flagship banking unit, also said that it will consult with management about the program introduction.

One of the agenda items at the meeting was Yoon’s pay, as the incoming chairman will also become the CEO of Kookmin Bank.

The system of outside directors was first introduced in Korea after the 1997-98 Asian financial crisis to keep management in check. However, outside directors are often under criticism for simply serving as rubber stamps for management.