FSS to limit bank CEOs' paychecks

By Na Jeong-ju

The Financial Supervisory Service (FSS) said Monday that it has launched a probe into salaries paid to bank CEOs, executives and board members, who are often criticized for receiving exorbitant amounts irrespective of their professional performances.

The chairmen of the country’s major private financial groups, such as Shinhan, KB and Hana, are said to be receiving some 3 billion won ($2.58 million) in annual salaries. That’s smaller than the paychecks of CEOs of some major global companies, but critics here say the problem is that just how much Korean executives are paid remains veiled in secrecy.

“Our sample survey showed that some financial firms are operating questionable salary systems for executives and directors,” an FSS official said. “We’ve decided to launch a full probe into salaries, benefits and stock grants offered by all domestic financial groups.”

The official said the FSS will consider setting up the guidelines concerning salaries for financial CEOs, if necessary, after the investigation is concluded.

The government is facing calls from civic groups to limit the ceiling for payments to executives and board members because of fears of them colluding to raise their own salaries.

Firms expressed deep concerns about the impending investigations.

“Calculating the salaries for staff and executives should be based on our own criteria. The government is going too far,” an industry source said. “The salaries for the chairmen are also much smaller than those for CEOs at global firms. I’m concerned that this controversy will worsen the public image of financial firms. They can be viewed as being irresponsible and unethical, which is not true.”

According to the FSS, Han Dong-woo, chairman of Shinhan Financial Group, received nearly 3 billion won in total income in 2012, including some 1.3 billion won in incentives.

Euh Yoon-dae, the outgoing head of KB Financial Group, is also believed to have received a similar same amount. The group will also offer him stock grants worth billions of won when he leaves the group next month.

The average annual income of board members at financial groups and banks amounted to 475.2 million won ($408,900) per person in 2012, down from 496.8 million won the previous year.

Compared to salaries of ordinary employees, executives at banking groups and lenders earned much higher incomes. The average annual income of bank employees was about 76 million won ($65,400) in the same year.

The data came as local banks are struggling with falling profitability owing to declining margins amid the central bank’s easing cycle and the economic slowdown. The FSS said that local banks’ combined first-quarter earnings amounted to 1.8 trillion won in the first quarter, down 45 percent from the previous year.