SEOUL: South Korea’s financial authorities are considering capping financial holding company chairs at two three-year terms, a governance overhaul that could reshape leadership succession at the country’s biggest banking groups and reignite debate over regulators’ role in corporate governance.
Industry reports said the proposal would bar chairs from serving a third term, limiting their tenure to six years.
It could also require reappointments to win support from at least two-thirds of voting shares while strengthening the independence of outside directors and nomination committees.
The Financial Services Commission said neither the measures nor the announcement schedule had been finalised.
Under current rules, chairs face no statutory term limit. Reappointments generally follow the same process as initial appointments, with a board nomination committee selecting a candidate, shareholders approving the appointment and the board naming the chair.
Supporters said tenure limits could curb closed succession systems, broaden candidate pools and give investors a greater role in appointments.
President Lee Jae Myung has criticised the leadership structure at financial groups as a “corrupt inner circle”, while Financial Supervisory Service governor Lee Chan-jin has called for clearer, more transparent succession procedures based on fair and objective criteria.
The industry warned that a blanket cap could undermine continuity and interfere with shareholders’ right to retain successful executives.
“Financial companies operate in a regulated industry and would have little choice but to comply with new rules,” an official at a financial holding company said.
“But they are essentially private companies, and it is debatable whether regulators should decide how long a chief executive officer (CEO) can remain in office.”
The official added that mandatory leadership turnover could disrupt long-term strategies even when the incumbent management is delivering results.
A senior analyst at a global securities firm voiced a stronger objection, and said the government had yet to justify imposing a statutory tenure limit.
“Financial companies are regulated businesses, but they are ultimately listed companies with shareholders and boards,” the analyst said.
“There might be a case for restrictions if executives serving three terms had repeatedly caused serious problems, but there has been no clear pattern.”
The analyst said a cap could run counter to the government’s push for a more advanced, shareholder-centred capital market.
“If management performs poorly, shareholders can vote against the appointment or replace directors,” the analyst said.
“Regulators should examine whether the process was fair rather than determine the outcome themselves.”
The argument carries particular weight in banking, where foreign investors hold large stakes.
As of Tuesday, foreign ownership stood at 79.5% at KB Financial Group, 68.5% at Hana Financial Group, 61.5% at Shinhan Financial Group and 46% at Woori Financial Group, according to Korea Exchange data.
“Foreign investors expect strong-performing executives to remain in place for longer,” the analyst said.
“With foreign shareholders holding large stakes, they can now vote against management if they see something wrong.”
Governance protections have strengthened in recent years. Revised commercial law expanded directors’ fiduciary duties to shareholders, while financial groups must maintain boards dominated by outside directors, operate succession plans and manage pools of internal and external CEO candidates. — The Korea Herald/ANN
