Part businessman, part politician needs to run Korea Exchange

By Park Hyong-ki

The Korea Exchange (KRX) has begun the process of accepting applications for the post of chief executive.

The market is once again watching this closely as to whether it will select a candidate with close ties to the government or an experienced businessman who can run the bourse with transparency and independence.

Already, some KRX insiders are leaking to the press their desire for a business executive as chief executive, not an ex-bureaucrat either from the Financial Services Commission (FSC), the finance ministry or even state-run policy banks.

This is because if they get the job, they will likely end up as their predecessors, including Jeong Chan-woo and others before him, and manage the bourse in the interest of politics.

Jeong recently resigned as the KRX chief amid controversy over his ties with ousted former President Park Geun-hye and links to the presidential scandal.

The top KRX position has mostly been awarded to former finance bureaucrats or regulators.

Since most key FSC positions are held by finance ministry bureaucrats and the KRX falls under the regulatory jurisdiction of the FSC, the stock market operator has favored former finance ministry officials as chief executive.

This way, the KRX would be able to operate with some degree of independence, while maintaining close relations with the government and regulators.

The government has no stake in the KRX, but the bourse operator is run like a quasi-sovereign agency. Private brokerage houses are the KRX’s majority shareholders.

As the representative of the capital market, its operations have been more scrutinized and monitored by the state especially after the global financial crisis in 2008.

Industry sources say given the characteristics of the KRX under such circumstances, which are not likely to change for a while, it will have to seek a balance in finding a candidate who can be part politician and part businessman.

“Any top executive position requires that person to use both political and business leverage to achieve one’s goal. If you just have one quality, the organization will not get very far. In the case of the KRX, it will need a new face who can play both parts and maneuver toward that goal,” said an industry source, who asked not to be named.

Bringing someone from outside but related to the industry can help as such a person could give a fresh perspective to an organization, even though that could met with short-term resistance.

The KRX is sort of like Korea Electric Power Corp. (KEPCO). The latter needs to make money to continue operating, but has to gain political approval, for instance, before raising utility fees or investing in energy projects, industry sources say.

The stock market operator has been trying to change its structure into a holding company for more than a decade, in line with the global exchange trend.

It remains to be seen whether the next chief can take this to the National Assembly for review.

“It is questionable if he or she can start debates or raise public interest during this administration since the government’s priority in finance is stabilizing the livelihoods of people with high debt,” another industry source said.