Can tougher reappointment rules curb power of Korea's bank holding company chiefs?

A corporate governance reform package unveiled by the government to make CEO succession at financial companies more transparent and rein in long-serving chairmen is facing questions over whether it will deliver meaningful changes, experts said Thursday.

Their skepticism centers on whether tougher voting requirements will make a difference when incumbent chairmen already enjoy overwhelming shareholder support, and whether independent directors will be able to challenge management in practice.

The announcement comes nearly a year after President Lee Jae Myung publicly criticized what he called a “corrupt inner circle” in which a small group of executives takes turns holding control of financial firms.

A central aim of the reform is to curb incumbent CEOs’ influence over the selection of their successors. Under the proposed rules, committees responsible for nominating CEO candidates would consist entirely of independent directors.

The package also seeks to make repeated reappointments harder at bank holding companies such as KB, Shinhan and Hana.

CEO nominations would require approval from at least two-thirds of the nomination committee’s full membership, up from a simple majority of members present. For an incumbent seeking another term, the threshold would rise to three-quarters.

The shareholder approval threshold would also increase with each reappointment, from a simple majority of votes represented at a shareholders’ meeting to two-thirds for a CEO’s first reappointment and three-quarters for a second or subsequent reappointment.

“Strengthening the role of nomination committees is a positive step toward making CEO appointments more objective,” said Hong Ki-yong, an emeritus professor of business administration at Incheon National University.

One question, however, is whether strengthening the formal requirements for independent directors will translate into greater independence in practice.

Existing outside directors at financial companies already meet the eligibility requirements for independent directors under the revised Commercial Act, raising doubts over whether the change in designation alone will make them any more willing to challenge management.

The higher voting thresholds may also do little to deter chairmen who already command strong shareholder backing and seek long tenures. The government initially considered banning bank holding company chiefs from serving more than three terms, but dropped the proposal in favor of tougher approval requirements.

This year, Shinhan Financial Group Chairman Jin Ok-dong secured 88 percent support for his reappointment, while Woori Financial Group Chairman Yim Jong-yong received 99.3 percent and BNK Financial Group Chairman Bin Dae-in 91.9 percent.

With incumbent chairmen already securing such strong shareholder backing, critics question how much practical difference a 75 percent approval threshold for a third term would make.

“As a way of limiting long CEO tenures, the measure does not appear particularly effective,” Kang In-soo, professor of economics at Sookmyung Women’s University.