Union-backed outside directors become less likely in financial circles

Industrial Bank of Korea CEO Yoon Jong-won speaks during an online meeting with new employees of the lender at its headquarters in Seoul, on Mar. 24. Yonhap

By Lee Min-hyung

Financial institutions in Korea will face a tougher time appointing labor-recommended outside directors after the Financial Services Commission (FSC) blocked a much-anticipated move by the Industrial Bank of Korea (IBK).

The labor-recommended outside director system was one of President Moon Jae-in's election pledges to enhance the influence of labor against management. The government pledged to introduce the initiative starting in the public sector, and then widen it to private firms.

IBK CEO Yoon Jong-won recommended to the FSC a number of candidates for two outside director seats, but the financial regulator ended up appointing two of IBK's management-backed figures, including Dankook University professor Kim Jung-hoon and Hanyang University professor Jung So-min. They will serve for three years as outside directors of the lender.

Yoon also included labor-backed candidates on the shortlist, but they failed to be appointed to the positions.

The appointment of labor-recommended outside directors was a major issue in the domestic financial industry, amid hopes that IBK might set an example by being the first to do so. Last year, KB Financial Group failed to appoint a labor-recommended outside director.

“If IBK had become the first financial institution to implement the initiative, other financial players, particularly state-run lenders such as the Export-Import Bank of Korea, or commercial lenders, would have aggressively resumed internal discussion over the issue, but that appears unlikely for the time being, after IBK failed to do so,” a financial industry source said.

Now, chances have grown slimmer for other financial firms to pursue such steps in the foreseeable future.

“Despite the much-hyped pledge, it will be virtually impossible to make private institutions adopt the system unless state-run organizations embrace it first,” the source said.