By Kang Seung-woo
The financial regulator said Monday that it has strengthened its supervision to regulate CEO risks at financial firms.
According to the Financial Supervisory Service (FSS), it has added new measures to the current inspections of chief executives and financial companies have been notified.
The financial watchdog said that from this month it plans to confirm whether CEOs have enough expertise to lead the firms and asked them to devise stricter requirements and conditions in the selection process of future heads.
Under the current inspection procedure, candidates without reasons for disqualification can become board members, but the new measure will require them to select more professional executives with tougher standards.
In accordance with the updated measures, the FSS will monitor to see if CEOs are wielding their leadership properly to draw approval and incorporate their organizations.
A system to ban CEOs from being reappointed for an excessively long time has also been implemented.
The address of the newly-enhanced supervision came after a protracted management struggle broke out at Shinhan Bank, which forced its top three executive from their posts.
Shinhan Financial Group saw Ra Eung-chan, Shin Sang-hoon and Lee Baek-soon resign late last year after Lee filed a complaint against Shin with the prosecution for alleged embezzlement and breach of trust.
Former Chairman Ra, who had been under criminal investigation for the violation of the Real Name Financial Transaction Law, stepped down in late October and former president Shin and Lee, Shinhan Bank CEO, followed in December.
“As witnessed in the Shinhan fiasco, a CEO risk can severely damage a sound financial group,” said an official of the FSS.
“Financial firms need to be equipped with a system to deal with such emergencies.”
The financial authorities are also set to fix bonus systems for chief executives.
Each financial firm will be checked thoroughly for complying with the criteria on stock options.
According to the FSS, CEOs recklessly depend on expanding their business in efforts to gain big bonuses based on their firms’ performance in a short period.
This is definitely true of the disgraced former Shinhan Financial head who drew criticism from the financial authorities last week for raking in 2 billion won from selling his stock options.
In a board meeting on Feb. 21, Shinhan gave the nod to Ra to exercise his right to sell some of the 307,254 shares that he had accumulated between 2005 and 2008, 212,241 of which he sold for a profit of 2 billion won ($1.8 million) in a week, according to the nation’s third-largest financial group by assets.
His excessive greed incurred the wrath of the top two financial regulators.
“Without changes in the organization and human resources, Shinhan Financial has no future,” Financial Services Commission (FSC) Chairman Kim Seok-dong told reporters, while FSS Governor Kim Jong-chang called Shinhan’s decision “insane.”