(LEAD) KB Financial's chief director resigns amid reform

(ATTN: ADDS possible influence on Kookmin Bank president; CORRECTS Cho's period of
service in para 3)

SEOUL, Feb. 5 (Yonhap) -- The chief of KB Financial Group Inc.'s board of
directors offered to resign Friday amid moves by the South Korean government to
reform non-executive boards of the nation's banking groups.
Cho Dam, the chairman of KB Financial's board of directors, expressed his
intention to step down as a non-executive board member, said the nation's biggest
financial service company that also controls top lender Kookmin Bank.
He has been under pressure to resign since the trade association for the banking
sector unveiled new guidelines last month that restrict outside directors to
two-year terms and a maximum service of five years, reversing the previous rules
that allowed three-year terms for an unlimited period. Cho will have served for
five years in March.
Cho is the third outside director to offer to resign from KB Financial's board
recently. Kim Han and Byun Bo-kyung, two of the group's nine outside directors,
expressed their intention to resign last week.
The latest resignation led KB Financial to cut the number of members of a
committee for nominating new non-executive directors down to five. The committee
previously had all nine of the outside directors as its members.
The changes came as the government has tried to increase the independence of
outside directors and curb cronyism between directors and company executives at
banking groups.
Non-executive directors have been criticized for turning a blind eye to risky
decisions by local banks that resulted in massive losses, particularly in light
of the recent global financial crisis.
The new guidelines also ban outside directors from taking stock options and other
performance compensation from the firms that they serve.
Some industrial watchers say the resignation of the three close aides to Kookmin
Bank CEO Kang Chung-won as outside directors may weaken his position.
Kang gave up his candidacy for the KB Financial chairmanship on Dec. 31 amid
rising tension with financial authorities over his appointment by the group's
non-executive directors. On Jan. 14, the Financial Supervisory Service and the
Bank of Korea launched a joint investigation into the group's trading activities
and alleged ties between Kang and the directors. Kang, however, has vowed to
complete his term as president of the bank, which expires in October.
"He might not be able to complete the term if he is found to have direct
responsibility for the bank's poor performances in the investigation," an
official with the banking industry said, requesting anonymity.
Kookmin Bank posted an estimated net profit of 600 billion won (US$512 million)
last year, only a quarter of 2008's profit of 2.7 trillion won.
(END)

Delete & Prev | Delete & Next