Global proxy advisers scrutinize KB Financial's surprise leadership change

KB Financial Group's surprise decision to replace its incumbent chairman despite record earnings is under closer shareholder scrutiny, with the world's two largest proxy advisory firms reviewing the nomination ahead of a shareholder vote, industry officials said Tuesday.

Institutional Shareholder Services (ISS) and Glass Lewis told The Korea Times that they are currently reviewing company proposals ahead of an extraordinary shareholders meeting scheduled for Nov. 20. Neither has yet issued a recommendation on the appointment of Lee Jae-keun as KB Financial's next chairman.

Glass Lewis said it was unable to comment on the nomination at this stage because its research on the company was still underway.

ISS similarly said its recommendation would be available once its research is published.

"I’m happy to send you our shareholder meeting research and recommendations for KB Financial Group once we publish, which is typically 14-16 calendar days ahead of the shareholder meeting, as noted in our media policy," an ISS spokesperson said.

Their recommendations could carry particular weight at KB Financial, which has the highest foreign ownership ratio among Korea's major financial holding companies.

As of Monday, foreign investors held 78.76 percent of KB Financial's shares. Foreign ownership briefly topped 80 percent in June after Chairman Yang Jong-hee announced in April that the group would cancel all 14.26 million treasury shares it held, equivalent to about 3.8 percent of total outstanding shares.

The high level of foreign ownership makes the views of global proxy advisers particularly relevant. Many foreign institutional investors rely on their recommendations when voting on proposals at shareholder meetings.

The scrutiny comes after KB Financial unexpectedly chose Lee over Yang, who had widely been expected to secure another three-year term after presiding over record-high net profits of more than 5 trillion won ($3.6 billion) for two consecutive years.

Although the group cited a need for "transformation and generational renewal," the decision has drawn attention because it comes amid a broader government push to reform governance and succession practices at financial holding companies.

President Lee Jae Myung has repeatedly raised concerns over prolonged leadership tenures, incumbent advantages in succession races and weak board oversight at financial holding companies, with Lee criticizing their boards as a "corrupt inner circle."

Regulators are now preparing governance reforms, though the final measures have yet to be announced.

Despite such scrutiny, both ISS and Glass Lewis backed the reappointments of Woori Financial Group Chairman Yim Jong-yong and Shinhan Financial Group Chairman Jin Ok-dong in March. Both reappointments won shareholder approval, supported by stronger share prices, higher dividends and tighter internal controls.

"The recommendations on KB will be closely watched as a test of whether global proxy advisers see the leadership transition through the broader lens of governance reform or treat it as a standalone succession issue," an industry official said.