Financial groups wrestle with union influence

Union members of KB Financial Group hold a press conference in front of the group's building in Seoul, Thursday. Yonhap

By Lee Kyung-min

Unions at state-run and commercial financial organizations are rushing to recommend outside directors to company boards, a move to gain a greater say in corporate management backed by the labor-friendly Moon Jae-in administration, according to industry sources Friday.

Union members say a rise in representation is needed to promote “public good.” But experts say corporate efficiency will be undermined due to the deeper intervention of unions whose growing collective rights are increasingly used to protect the vested interests of those with the highest salaries and job security.

Also fanning concern of a management-labor standoff is the ruling Democratic Party of Korea (DPK) leadership being filled recently with figures with extensive labor movement backgrounds.

One employee of a stock ownership association comprised of a small group of unions under KB Financial Group said recently that it has recommended two figures with expertise in environmental, social and governance (ESG) to be appointed as outside directors for the Nov. 20 provisional shareholders' meeting.

They are Seoul National University Graduate School of Environmental Studies Yun Sun-jin and Ryu Young-jae, the CEO of Sustinvest, an ESG advisory.

The recommendation has been interpreted as a stepping stone to the appointment of a labor director, defined by the requirement of labor participation in corporate management, a presidential election pledge recently losing steam amid fast-souring public sentiment over the administration's series of failed drives, notably real estate policies.

The association says the two are needed for effective operation of an ESG committee set up under the company board in March, and the association-backed figure will expand influence in corporate management.

Unlike three failed previous attempts between 2017 and 2019, the push is expected to gain ground bolstered by DPK lawmaker Park Hong-bae, who joined the party's Supreme Council on Sept. 1, a first for a former Korean Financial Industry Union (KFIU) head to join the ruling party's key leadership.

Park was elected KFIU head last year after pledging for greater union representation via implementation of union-recommended outside directors. Also helping was his known hardline stance as head of KB Financial's union through orchestrating KB Kookmin Bank's first strike in 19 years in January 2019.

“The board needs ESG experts to bolster transparency and objectivity,” Park said, not giving any mention of thorny union rights issues including wage hikes and extending the retirement age, a strategic move to buy time until after the appointments are finalized.

Backing the remarks was DPK lawmaker Min Byung-duk sitting on the National Assembly's National Policy Committee. “The issue will be a key area subject to legislative oversight,” he said.

The growing union power is a major headache not only to KB Financial Group Chairman Yoon Jong-kyoo whose bid for a third term could be frustrated by labor conflicts, but also state lenders and financial organizations.

Unions at Industrial Bank of Korea (IBK), Export-Import Bank of Korea (Eximbank) and Korea Asset Management Corp. (KAMCO) will seek to come up with a list of figures to replace outside directors, some of whose terms will expire early next year.

IBK CEO Yoon Jong-won, whose appointment was fiercely opposed by the bank's union in January, promised to let the union recommend a director in return for halting its strike demanding his resignation.

Dankook University economist Kim Tai-gi said the unions seeking to gain ground in the name of public good is nothing short of a political tactic to exert more influence.

“The highest-paid group of white-collar workers with great job security wants to solidify their standing in the political area in the name of a green initiative. It remains to be seen whether the issues of wage hikes and other employee benefits will be put on the negotiating table in the months to come.”