It has been confirmed that five out of seven outside directors of KB Financial Group selected Lee Jae-geun, head of KB Financial Group’s Global Division, as the next chairman of KB Financial Group. It is interpreted that the outside directors faced significant deliberation, as they met the minimum requirement under internal rules to secure approval from at least two-thirds of the members of the Chairman Candidate Recommendation Committee.
At the same time, concerns have been raised calling for thorough verification, objective evaluation, and balanced checks on outside directors who are granted ‘powerful authority’ in appointing a financial holding company chairman.
According to the financial sector on the 18th, it was revealed that five of the seven outside directors cast their votes for Lee Jae-geun at the Chairman Recommendation Committee meeting held on the 11th to select the next KB Financial chairman. Yang Jong-hui (Chairman) received two votes, while Kwon Kwang-seok, former Woori Bank president and the only external candidate, received no votes.
According to KB Financial’s internal rules, a candidate must receive support from at least two-thirds of the members of the Chairman Recommendation Committee to be officially confirmed as the next chairman candidate. While the vote margin shows a two-vote gap between Yang and this division head, it can also be seen that this division head narrowly secured the position as the next chairman by obtaining the minimum required five votes.
Initially, the prevailing view in the financial sector was that Lee Jae-geun would likely continue his term. Lee Jae-geun has built a case for reappointment by leading KB Financial to its highest-ever performance since taking office. However, the outside directors’ choice turned out to be different from expectations in the financial sector.
This is not the first time that KB Financial’s outside directors have staged a ‘surprise rebellion.’ When Lee Jae-geun was designated as the next chairman of KB Financial in 2023, the financial sector viewed Heo In, then vice chairman of KB Financial, as a strong candidate.
Heo In’s status as a one-year junior to then-President Yoon Suk-yeol at Seoul National University Law School was also taken into account. However, it is reported that the Chairman Recommendation Committee unanimously selected Lee Jae-geun at that time.
A financial sector official stated, “Unlike other financial holding companies, KB Financial’s outside directors have shown independent actions toward management on several occasions in the past,” and added, “Looking at the decisions of the Chairman Recommendation Committee in 2023 and this year, it is far from a scene of entrenched positions.”
The process of selecting KB Financial’s next chairman demonstrated that the board possesses independence not swayed by the current chairman. However, concerns continue to be raised calling for checks on outside directors who hold powerful authority in appointing Ban Dae-ro (Chairman). While financial authorities have repeatedly emphasized the ‘independence’ of outside directors, they also point out that control and balance over their authority are equally necessary. The seven outside directors of KB Financial are mostly recommended by external institutional investors and vetted by the Board’s Outside Director Candidate Recommendation Committee to select suitable candidates.
A financial sector official noted, “It is necessary to find a balance not only regarding board independence but also concerning the issue of power concentration within the board,” adding, “It remains questionable whether outside directors who meet once a month and discuss only highly refined agenda items can grasp the overall management of the group and make accurate judgments on chairman candidates.”
In particular, while financial authorities emphasize the expertise of outside directors, there are also calls that comprehensive judgment on overall management and balanced perspective and insight should be the basic qualifications for outside directors. The Financial Supervisory Service has previously emphasized the need to recruit experts in consumer affairs and IT information security from a standpoint of strengthening outside director expertise.
Financial authorities are also pushing to improve the evaluation system for outside directors. In 2023, at the financial company governance model meeting, it was proposed as a principle that fairness and objectivity should be enhanced by utilizing external professional institutional investors when evaluating outside directors. However, evaluations of outside directors through external professional institutional investors have been adopted only in some regional financial holding companies. Most large financial holding companies rely solely on internal evaluation indicators, drawing criticism of conducting ‘self-evaluations.’ In actual outside director evaluations, most receive ratings of ‘very excellent’ or ‘excellent,’ thereby meeting reappointment requirements.
in FINANCE
