Financial groups strengthen gender diversity of their boards

ESG trend and Capital Markets Act revision accelerate female board membership

By Anna J. Park

Korea's financial groups have been designating female independent directors as board members prior to shareholder meetings slated for the end of this month. This trend of recommending female outside directors for the board has not been limited to local financial groups. In fact, similar developments have also been taking place at major conglomerates.

Prompting the changes is Korea's revised Capital Markets Act, which will take effect from August of this year prohibiting listed companies with over two trillion won ($1.6 billion) in total capital from having all of its board members composed of men. Since the Capital Markets Act was revised in early 2020, many corporations have appointed female outside directors in order to prepare for the new requirement for listed companies. Companies that have yet to meet this legal requirement are also in their final stages of appointing female independent directors to their boards.

In addition to the Capital Markets Act revision, the increasingly important ESG management principles are being counted as one of the key reasons behind the appointment of female board members. The gender composition of board members is considered to be a key factor in the category of corporate governance.

Annual shareholders' meetings are where corporate board member appointments are confirmed and local financial groups that do not yet have female outside directors on their boards are aiming to appoint them by the end of this month.

As of the end of last year, Woori Financial was the only group among the top five major financial groups in the country ― Shinhan, KB, Hana, Woori and NH ― that did not have any female independent directors on its board. The four others already had female outside directors on their boards as of the end of last year.

In a move to make its board more diverse in terms of gender, Woori Financial recommended attorney Song Soo-young, a law firm partner with expertise in ESG advisory and the Capital Markets Act, as an outside director on its board earlier this month. Thus, Woori will at least have one female outside director by the end of this month after its next shareholders' meeting.

As Shinhan Financial Group has also recommended one more female independent director, Kim Jo-seol, an economics professor at the Osaka University of Commerce, the group will be strengthening its gender diversity by the end of this month, with two women among its outside board directors.

In line with the trend of the five major financial groups to make their boards more diverse in terms of gender, BNK Financial Group, DGB Financial Group and JB Financial Group, which have so far lacked any female outside directors as of the end of last year, are planning to appoint female outside board members at their shareholders' meetings later this month.

First off, BNK Financial has recommended Kim Soo-hee, a 38-year-old attorney with banking industry expertise. She also served as a board member for BNK Capital, as well as Busan Bank, in 2020 and 2021.

DGB Financial Group is planning to appoint Kim Hyo-shin, a professor at Kyungpook National University's College of Law, as an outside director on its board. As a business law expert, she will be the only woman among the group's six outside directors.

JB Financial is set to appoint Lee Seung-yeop, a veteran accountant with 30 years of experience, as an outside director later this month. She used to serve as a senior executive director at EY Korea, and is now working at Woori Accounting.

Female board membership in Korea lags far behind

Korea International Finance Institute CEO Kim Sang-kyung, who also leads the Korea Network for Women in Finance as its chairperson, said she welcomes the latest trend in the composition of major financial groups' boards. Nevertheless, she stressed that additional, more fundamental changes are required to improve the gender diversity of boards in Korea.

"According to an MSCI report about women on boards published in 2020, the percent of female directors as members of the board stood at only 4.9 percent, which is even less than half of Japan's 10.7 percent and China's 13 percent," Kim said during a phone interview with The Korea Times.

"Even without comparing Korea's figure to those of developed countries like France, the percentage of which is 43 percent, the U.S.' 28 percent, the U.K.'s 34 percent and Germany's 25 percent, the situation in Korea lags far behind those of neighboring countries in Northeast Asia," she explained, stressing the need to increase the gender diversity of board members.

She also pointed out that female outside board members of Korean companies are mostly professors from academia, followed by experts from the legal profession. These backgrounds differ considerably from the preferences of global asset managers like BlackRock, which place more importance on appointing board members with strong industry experience or expertise.

"Thus, it would be more desirable to see more female outside board members with actual industry experience being appointed," she said, adding that another major problem is that there are hardly any female executive directors on the boards of local financial companies.

"As executive directors of the board tend to enjoy a more powerful presence in actual company business than outside directors, I hope to see more female leaders in the industry climb up to such C-level [executive] positions," Kim said.

Currently, about 50 percent of the entry-level staff of financial companies are women ― a huge change from decades ago when the female presence was much rarer. Kim said that they have now been working as mid-level managers, and they need to keep moving up to higher positions in their companies in order for local financial companies' corporate structures to be fundamentally balanced in the end. Kim also emphasized the need for the female workforce to be evenly distributed in all divisions and areas of the financial companies, in order to see more C-level female leaders later across them.