Key Summary
- South Korea’s financial authorities plan to raise shareholder approval thresholds for bank holding company chief executives starting with a third term.
- For a third consecutive term, approval would need support from at least 75% of voting rights present at the general meeting.
- CEO candidate recommendation committees would be composed entirely of independent directors under the proposed changes.
- The authorities also plan to expand outside candidate nomination channels and tighten rules on CEO succession and contact during the selection process.
Main Story
South Korea’s Financial Services Commission and the ruling Democratic Party unveiled a package of governance reforms aimed at bank holding companies, with the central goal of making it harder for chief executives to secure repeated terms through board control or concentrated influence.
Under the proposal, a bank holding company CEO seeking a second term would need approval from at least two-thirds of the voting rights present at the shareholders’ meeting. If the CEO seeks a third term, approval would have to rise to three-quarters of the voting rights present. The requirement for an initial appointment would remain unchanged.
The authorities also plan to strengthen the internal nomination process. The CEO candidate recommendation committee would be made up entirely of independent directors, and the threshold for approving candidates within that committee would rise for repeated terms. The government said the aim is to curb practices that allow sitting CEOs to shape the board around themselves and secure repeated reappointment.
Additional measures would narrow the ability of a sitting CEO to influence the next succession process. The reform package includes a ban on the incumbent CEO attending meetings of committees handling the recommendation of independent directors and audit committee members. It also seeks to prohibit improper involvement in the succession process, with possible sanctions including dismissal requests, suspension of duties for up to six months, or warnings.
The authorities plan to require disclosure if a sitting CEO and members of the CEO recommendation committee make contact during the succession process, including the reason and content of the interaction. Financial firms would face corrective orders, warnings, caution notices, and administrative fines for violations.
The package also broadens the pool of potential independent director candidates. Shareholders holding at least 0.1% of shares for six months or more would be able to recommend independent director candidates. Institutional investors would also face fewer obstacles in making such recommendations, as the authorities plan to clarify when candidate recommendations are not considered to have the purpose of exerting management control.
In addition, the authorities want financial companies to hold meetings attended only by independent directors at least twice a year and keep records of those meetings. They also plan to specify mandatory items and deadlines for board minutes and create rules for stenographic records.
Officials said the reforms will be reflected in a revision to the Act on Corporate Governance of Financial Companies later this year. The Financial Services Commission said the changes are intended to strengthen genuine checks by boards and shareholders rather than formal compliance alone.
Background
The article says the proposal comes about 11 months after Lee Jae-myung criticized long-serving CEOs of financial companies as a “corrupt inner circle.” It also notes that the current debate follows broader attention to corporate governance after revisions to South Korea’s Commercial Act.
Items Requiring Further Verification
- The article attributes the policy direction and timing to comments made by Lee Jae-myung; the specific context and official record of those remarks should be independently checked.
- The practical effect of the 75% shareholder approval rule is presented as uncertain, based on cited approval rates for current CEOs, but the future impact remains a projection.
- The article states that the Financial Services Commission plans to finalize a legal amendment this year; this is a policy intention rather than an enacted rule.