Bank outside director system to face overhaul

SEOUL, Jan. 25 (Yonhap) -- The outside director system at South Korea's banks
faces an overhaul that could beef up director independence and cut cozy ties with
management, an industry association said Monday.

Under a new measure, outside directors of banks and holding companies whose
flagship units are a lenders will be able to serve only two-year terms, according
the Korea Federation of Banks. Even if a director is reappointed, his or her
tenure will be limited to a maximum of five years.
Currently outside directors are guaranteed a three-year term if selected, with no
restriction over how long they can hold the post.
The chairmanship of the board of directors will also be elected annually under
the new measures, and local lenders will be required to change 20 percent of
their external directors each year, according to the association
"The move is expected to enhance the independence and professionalism of outside
directors in the banking sector," it said in a statement.
The proposal follows the resignation of the chairman-elect of KB Financial Group
Inc., which drew accusations that the government was putting its hand in the
dealings of a private company.
Kang Chung-won offered to step down on Dec. 31 from KB's chairmanship amid
intense scrutiny from the national financial regulator into alleged wrongdoings
by the group's external directors.
The Financial Services Commission, which has sought to overhaul the director
system, earlier asked KB to postpone the selection of its new chairman. But the
group -- whose outside directors wield a decisive influence the group's
appointment of its head -- pushed through the nomination.
The commission has pushed for revamp the outside director system since early
2009, when the global financial turmoil raised concerns about governance
structures at financial firms. The government is mulling steps to reshuffle
corporate governance in other sectors as well, including the brokerage and
insurance industries.
South Korean banks are expected to apply new rules governing external directors
at shareholder meetings in March. KB Financial plans to convene an emergency
board meeting on Wednesday to discuss the issue, during which a few outside
directors may resign.
sooyeon@yna.co.kr
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