What drove KB to nominate Lee Jae-keun as next chairman?
Summary
KB Financial Group’s surprise choice of Lee Jae-keun as next chairman reflects growing pressure on financial holding companies to strengthen board independence and make leader selection fairer and more transparent. The group said it wanted transformation and generational renewal, even though current Chairman Yang Jong-hee had delivered record net profits above 5 trillion won for two straight years. Observers also pointed to government governance reform efforts and an ongoing tax audit of KB Kookmin Bank as part of the backdrop.
Key Facts
- KB Financial said Lee Jae-keun will be selected for a three-year term and his appointment is to be finalized at a shareholder meeting on Nov. 20.
- Lee was chosen over incumbent Chairman Yang Jong-hee and former Woori Bank CEO Kwon Kwang-seok.
- KB Financial had posted record-high net profits of more than 5 trillion won for two consecutive years under Yang’s leadership.
- President Lee Jae Myung has criticized a system in which the same people move between bank CEO and financial holding company chairman roles for 10 to 20 years.
- An ongoing tax audit of KB Kookmin Bank was cited as one factor drawing attention to the timing of the decision.
Headquarters of KB Financial Group in Seoul / Courtesy of KB Financial Group
The surprise nomination of KB Financial Group Vice Chairman Lee Jae-keun as its next chairman shows that the financial sector is under growing pressure from regulators to reform governance by strengthening board independence and improving fairness and transparency in leader selection procedures, according to observers in the industry.
Current Chairman Yang Jong-hee, another contender, did not get the chance for a second term even though KB Financial had delivered record-high net profits of more than 5 trillion won ($3.7 billion) for two consecutive years under Yang’s leadership.
Although the group cited a need for “transformation and generational renewal,” it is widely believed in the industry that the government's move is beginning to affect governance at financial holding companies.
President Lee Jae Myung and financial authorities have long raised concerns over extended tenures of leaders at the holding companies. They have pointed out that incumbent heads have a relatively strong advantage in succession processes and that boards may not be able to provide adequate checks and balances.
President Lee in particular criticized a system in which the same individuals move between bank CEO and financial holding company chairman positions for 10 to 20 years, describing it as a “corrupt inner circle.”
Some observers suggest that repeated calls from the government for governance reform may have influenced KB's decision to some extent. The timing has also drawn attention given other sensitive issues involving the group, including an ongoing tax audit of KB Kookmin Bank.
Others view the decision as a sign that board-led governance, rather than a chairman-centered succession system, may be beginning to take hold. From this perspective, the board appears to have assessed the candidates independently and made its decision at some distance from the incumbent chairman.
“Going forward, greater attention will inevitably be paid to the criteria and standards boards use to evaluate and select candidates for CEO positions,” a financial industry official said.
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