Stricter voting thresholds for re-elections favored over term limits
Discussions accelerate ahead of year-end expiry of major bank chiefs' terms
The Democratic Party of Korea and the government will hold a party-government consultative meeting Thursday on improving corporate governance at financial institutions.
With the terms of several major bank chiefs set to expire at year's end, the two sides are moving quickly on reform. The meeting is expected to favor a graduated approach — tightening voting thresholds for successive re-elections — over imposing a hard cap on the number of terms a financial holding company chairman may serve.
The Democratic Party's Policy Committee will host the meeting Thursday morning at the National Assembly Members' Office Building in Yeouido, according to sources familiar with the matter. Party representatives will include Policy Committee Chairman Kwon Chil-seung and lawmakers sitting on the National Assembly's Political Affairs Committee. From the government side, Financial Services Commission Chairman Lee Eok-won, FSC Financial Policy Bureau Director Jeon Yo-seop and Financial Supervisory Service Director Lee Chan-jin are expected to attend.
At the meeting, the FSS will first present the findings of its on-site governance inspections of financial firms, after which the FSC will outline its proposed reform measures.
The meeting was convened after officials concluded that governance reform discussions could no longer be delayed given the imminent expiry of the terms of the chiefs of the four major banks at year's end.
The central issue is how to check the long-term entrenchment of financial holding company chairmen and make the appointment process more transparent. Regulators had initially considered capping chairmen at three consecutive terms by law, but have recently shifted toward a tiered approach that would progressively raise the voting thresholds required from the executive candidate recommendation committee and at shareholder meetings with each successive re-election.
"Rather than directly limiting the number of re-elections a financial holding company chairman can seek, discussions are moving toward raising the voting requirements the more times a chairman seeks re-election," a Democratic Party lawmaker on the National Assembly's Political Affairs Committee said.
Under the proposal being reviewed, an initial appointment would require approval from at least two-thirds of the executive candidate recommendation committee. A first re-election bid would require support from at least three-quarters of the committee plus a special resolution at a shareholder meeting. A third-term bid would face an even higher bar — requiring a quorum of more than half of all issued shares and approval from at least three-quarters of shareholders present.
Also under discussion are requirements to disclose a candidate's management track record and history of financial misconduct, and to have the chair of the executive candidate recommendation committee personally explain the nomination rationale at the shareholder meeting. The measures are aimed at checking the concentration of power in the hands of financial holding company chairmen and strengthening oversight by boards and shareholders.
The push to reform governance at financial institutions gained momentum after President Lee Jae-myung criticized the process for appointing financial holding company chairmen and bank chiefs as a "corrupt inner circle" in December last year. The FSC and FSS have been operating a governance modernization TF since early this year to develop reform proposals. The FSC also briefed Democratic Party members of the National Assembly's Political Affairs Committee on its proposals on Nov. 2.
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