By Kim Jae-kyoung, Kim Jae-won
Shinhan Financial Group said Friday that it will hold a board meeting at its headquarters in Taepyeong-ro, Seoul, next Tuesday, to discuss the dismissal of its CEO Shin Sang-hoon for alleged involvement in embezzlement and inappropriate lending.
“The agenda has yet to be decided but board members will discuss how to deal with various issues associated with the internal feud, including dismissing Shin,” a Shinhan spokesman said.
Although Korean-Japanese shareholders decided to leave the matter to a board decision at an emergency shareholder meeting in Nagoya, Japan Thursday, a showdown vote is highly likely because the four Korean-Japanese outside directors are still against the group’s move to oust Shin even after the meeting.
Group Chairman Ra Eung-chan and Shin are now engaged in a vote-collection campaign that will determine their fate. Depending on the outcome of voting, Ra and Shinhan Bank CEO Lee Baek-soon, as well as Shin, could be held accountable for the internal dispute. Market participants believe that Ra and Lee colluded to oust Shin.
The Shinhan Financial board is composed of Ra, Shin, Lee and Ryu Shi-yul, advisor to law firm Sejong, plus eight outside directors.
If Shin’s dismissal is put to a vote by the board, Shin will likely not exercise his vote, according to regulations. They call for the attendance of half of the board members, with the passage of Shin’s dismissal requiring yes votes by half of those present.
All the directors are expected to attend the board meeting, considering the importance of the issue at stake.
The Korean-Japanese shareholders exercise more influence than just their collective 17-percent stake.
Foreign investors of Shinhan Financial Group have a total 42 percent of the group’s stake, but are shadowed by the Korean-Japanese shareholders, who are united on the issues
It is clear that Korean-Japanese shareholders of Shinhan hold the key to deciding the group’s fate amid Shinhan’s leadership crisis as they have four outside directors in the 12 member boardroom.
Contrary to their powerful initiative, foreign investors have only one outside director, which BNP Paribas can recommend. Industry watchers say it is largely because of the different investment styles between two groups.
“Korean-Japanese shareholders have a strong sense of solidarity. They seem like to be one person as they share a common experience and economic interest,” a director from a foreign investment bank said on condition of anonymity.
“However, foreign investors have no empathy at all. They do not even know each other. Foreign institutions investment in Shinhan is a small part of their portfolio. That’s why they are not interested in the issue.”
Founders’ premium
Local analysts said the Korean-Japanese have a founders’ premium as they set up the third-largest financial group in the nation three decades ago.
“Shinhan originally came from Korean-Japanese businessmen. They still have a powerful influence on the group,” a local financial expert said.
Shinhan Bank was established in 1982 supported by Korean-Japanese businessmen, who suffered discrimination for lending in Korea at the time. They decided to build their own bank, and hired Ra, who has worked at Nonghyup and Daegu Bank, as the new bank’s leader. Since then, Shinhan has grown in to one of the top three lenders in the nation based on timely mergers and acquisitions and management strategies.
The four other directors are Chun Sung-bin, chairwoman of the boardroom and Sogang University professor, Kim Byung-il, president of the Korean Studies Advancement Center, Yoon Kye-seop, Seoul National University professor, and an executive from BNP Paribas.
Local media reported Korean directors have close relationships with Ra, while Korean-Japanese may vote for Shin.