Will IBK CEO offer board seat to labor union?

The Industrial Bank of Korea (IBK) union members block newly appointed IBK CEO Yoon Jong-won, left, from entering his office at the IBK headquarters in Seoul, Tuesday. / Yonhap

By Park Jae-hyuk

The Industrial Bank of Korea (IBK) is facing growing concerns as the state-run lender's newly appointed CEO Yoon Jong-won is probably going to offer to introduce a “co-determination system” in a bid to appease the bank's union, according to industry officials, Tuesday.

In a co-determination system, seats on a board of directors are given to employees or their representatives.

This was one of pledges President Moon Jae-in made during his election campaign, but it has never been carried out in the nation's financial industry.

Previously, the state-run Export-Import Bank of Korea (Eximbank) discussed with its union about offering one board seat to an expert recommended by its members. However, it eventually hired two experts recommended by management as new board members.

The Eximbank union's failed attempt will likely prompt the IBK union to further pressure their new CEO to enforce worker representation on the board of directors.

The union requested a shared governance structure in February 2019, but this ended in failure.

At that time, then Financial Services Commission (FSC) Chairman Choi Jong-ku expressed his skepticism about offering board seats to bank employees, saying, “Considering wages and welfare offered to bank workers, their working conditions are not poor enough to enforce worker representation on boards of directors.”

According to the IBK's articles of association, the FSC chairman has the right to appoint and dismiss the state-run bank's nonexecutive directors.

Yoon reportedly said he would consider introducing a co-determination system, during a phone call with local news outlet Hansbiz.

“A co-determination system can be a bargaining chip for both the IBK's management and union, because it can calm controversy over bureaucratic control,” a financial industry official said on condition of anonymity.

The IBK union, which has blocked the CEO from entering his office since his appointment, has denied the expectation, saying, “The appointment of the CEO and a co-determination system for sound management are different topics.”

Economic experts said a codetermination system will hinder management efficiency.

“Directors may not be able to make their voices heard when discussing sensitive issues, such as restructuring,” said Yun Chang-hyun, an economist at the University of Seoul. “Co-determination in Germany is also regarded as a failure among experts.”

Private sector banks have also been concerned about the labor-friendly approach, because it may lead the government to pressure them to give management rights to their workers.