Bank outside director system to face overhaul

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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 guideline, outside directors of banks and holding companies whose
flagship units are lenders will be able to serve terms for up to two years,
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 head of the board of directors will also be elected annually under the new
measures, and local lenders will be required to change one-fifth of their
non-executive board members 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.
Outside directors are also not allowed to receive stock options or other
compensation linked to their performance, and qualifications for non-executive
members will be tightened, it added.
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 said it has pushed for revamping the outside director system since
early 2009, arguing that 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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