Financial Holding Company Chairs Face Higher Hurdles With Each Reappointment... 75% Shareholder Meeting Approval Required for a Third Consecutive Term

At Initial Appointment, Candidate Must Win Two-Thirds Approval from the Executive Candidate Recommendation Committee
For Reappointment, Threshold Rises to Three-Quarters... A Third Consecutive Term Requires 75% of Votes Represented at the Shareholders' Meeting
Committee Chair to Explain Candidate Recommendation Directly at Shareholders' Meeting

Financial authorities are pursuing a plan to tighten the voting requirements for the executive candidate recommendation committee and shareholders' meetings as the number of terms served by financial holding company chairmen increases.

Yonhap News

According to the financial sector on November 2, the Financial Services Commission reported a plan to improve the governance of financial companies to Democratic Party of Korea lawmakers on the National Assembly's Political Affairs Committee.

Under the proposal, when a chairman is appointed for the first time, the candidate must receive approval from at least two-thirds of the executive candidate recommendation committee members. The candidate must then secure approval from a majority of the voting rights held by shareholders present at the shareholders' meeting and from holders of at least one-quarter of the total issued shares. This is seen as an effort to tighten the committee's voting requirements from the initial appointment stage and make the candidate screening process more rigorous.

The requirements become stricter for reappointment. A candidate must receive approval from at least three-quarters of the committee members, as well as approval from at least two-thirds of the voting rights held by shareholders present at the shareholders' meeting and holders of at least one-third of the total issued shares. Under these rules, for example, a candidate at KB Financial Group, whose committee has seven members, would need at least six votes in favor.

For a third consecutive term, the committee requirements would remain the same, but the candidate would need approval from at least three-quarters of the voting rights held by shareholders present at the shareholders' meeting and holders of at least half of the total issued shares.

The FSC initially considered legally limiting chairmen to three consecutive terms, but appears to have settled on gradually tightening voting requirements according to the number of terms served.

The plan also calls for the committee chair to explain directly at the shareholders' meeting why the committee recommended a candidate for chairman of the financial holding company. The aim is to hold the committee more accountable by making it disclose to shareholders the background to its selection and the basis for its judgment. The proposal is also said to include applying a responsibility map to the committee chair.

The details of the governance improvement plan are expected to be finalized after consultations between the government and the ruling party in the near future.

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