Gov’t launches task force to reform governance in financial sector

(Yonhap)

The South Korean government has launched a task force to enhance fairness and transparency in financial industry governance, following President Lee Jae-myung’s warning about a corrupted inner circle in the sector.

The Financial Services Commission (SFC) said on Friday that it held an inaugural meeting of the Governance Advancement Task Force, chaired by Vice Chairman Kwon Dae-young, to discuss measures to improve corporate governance in the financial industry.

“In the case of bank holding companies, ownership structures are highly dispersed, giving them the characteristics of ownerless firms,” Kwon said. “As a result, there have been persistent criticisms regarding closed processes and entrenchment issues in the appointment and reappointment of holding company chairmen.”

“By settling into a profit-sharing-style governance structure, business practices have also clung to outdated models centered on interest margins, resulting in a disappointing performance that falls short of the expectations of the times and the public,” he added.

Accordingly, the task force plans to discuss institutional reforms to corporate governance in the financial sector, including strengthening the independence of boards of directors, enhancing fairness and transparency in CEO appointments, and improving the rationality of performance-based compensation systems.

The task force aims to finalize governance improvement measures by March.

Institutional reforms requiring legislative amendments will also be reflected in the Act on Corporate Governance of Financial Companies.

“To dispel distrust that CEO appointment processes are run behind closed doors as an insiders-only affair, we will devise measures to ensure a transparent, open, and competitive succession program that anyone can find convincing,” Kwon said.

He added that the commission would also consider measures to strengthen shareholder oversight of CEO reappointments and to claw back excessively paid performance-based compensation.