By Kang Seung-woo
Shinhan Financial Group will appoint an acting CEO for the group Monday to fill the management vacuum caused by the suspension of its CEO Shin Sang-hoon from his duties for alleged involvement in embezzlement and illegal lending.
The group said Friday that it will hold a board of directors meeting Tuesday to name an acting CEO who will lead the nation’s third largest financial holding company until the prosecution’s investigation against Shin is completed.
Market participants and investors are paying close attention to the board meeting as it is expected to give a clue to the pecking order of the group following the ongoing internal feuding involving its top three _ Group Chairman Ra Eung-chan, Shin and Shinhan Bank CEO Lee Baek-soon.
“The board of directors will come up with an acting CEO on Tuesday,” said a Shinhan Financial spokesman.
“Since Shin was suspended from duty, Ra has been swamped with work. Subsequently we decided to pick an acting CEO,” he added.
Initially, Ra planned to take on the CEO tasks simultaneously, but due to an excessive workload, the group has decided to appoint an acting president.
The acting CEO will be in charge of routine affairs, while Ra will handle important matters requiring group strategy-wise decisions. The CEO post has been vacant since Shin, 62, was banned from his duties on Sept. 14.
According to sources close to the financial group, a few insiders and those familiar with Shinhan, including non-standing director Ryu Shi-yul, have been on the candidate list.
The 72-year-old, who is close to Ra, headed the Korea Federation of Banks (KFB) and served as the group’s director for the past five years.
There is also a chance, albeit remote, to select an outsider, as KB Financial Group did. KB, the largest local financial group, named Euh Yoon-dae as its new chairman in July.
The group’s move comes on growing concerns that it may face a huge management vacuum as the big three are all entangled in legal disputes. Depending on the outcome of investigations, all three, although unlikely, could step down at the same time.
Ra and Lee are facing challenges to their leadership. Prosecutors resumed an investigation into allegations that the 71-year-old chairman broke the real-name account law.
The chairman is suspected of violating the real-name financial transaction law by transferring 5 billion won to Park Yeon-cha, a Busan-based businessman and supporter of the late former President Roh Moo-hyun, through several bank accounts opened under borrowed names in 2007.
This is punishable by up to five years in jail or a maximum fine of 30 million won. An individual who receives fines or heavy penalties for the violation of financial rules cannot be appointed as a financial company executive.
As for Lee, 58, the Korean-Japanese shareholders have tried to dismiss him for causing internal friction and he was sued for defamation and violation of the banking law by Tomorrow Group, which was involved in Shin’s alleged illegal loans.
Shinhan Bank, the group’s flagship unit, asked the prosecution to probe Shin earlier this month for his possible involvement in embezzlement and inappropriate lending.
The bank has accused him of illegally extending 95 billion won ($82 million) in loans to companies involving one of his relatives while serving as its president between 2003 and 2009. He is also suspected of embezzling 1.5 billion won in advisory fees which should have been paid to a group honorary chairman.
As a result, the group management tried to dismiss Shin at a board meeting on Sept. 14, but the financial company’s 12-member board voted 10-1 in favor of his suspension in Nagoya, Japan, where four of the group’s outside directors reside.