[EDITORIALS]Holding Company Must Not Fail
The four banks slated for the state-run financial holding company held general shareholders' meetings Monday and selected new bank presidents and other executives. The CEO of the holding company was chosen at the end of February, and when members of the board of directors are selected March 12 , the hardware will be in place for the company to set sail in early April, as planned.
What is more crucial though is that the software is ready to operate flawlessly. The financial holding company is the first of its kind in Korea, and much trial and error is bound to occur in the process of operating it. The success of the holding company will depend on whether or not these problems are manageable. That is why we have emphasized on several occasions that the vision and strategy for the holding company need to be articulated and a dry run has to be conducted as soon as possible. The government simply announced the founding of a holding company without adequate preparation, and chaos has reigned ever since. The government cannot simply do away with the holding company if it falters. This company is composed of four banks, Hanvit, Peace, Kwangju and Kyongnam. It will be the largest Korean financial institution, with total assets exceeding 100 trillion won ($78.7 billion). Above all, this state-run entity is a key to second-round financial restructuring, together with the merger of Kookmin Bank and HC&B. If the holding company fails, the blow to the national economy will be immense.
Therefore, the holding company must get off to a strong start, but judging from the process so far we cannot paper over the worries. To begin with, it is worrisome that the government seems to have been deeply involved in the selection of the holding company's CEO, the presidents as well as the management process. In case of the presidents and other executives of the affiliates, the CEO of the holding company was supposed to choose them, but he reportedly did not have enough time to complete the task. In addition, reports are circling that the government has several plans, such as creating an information technology affiliate, incorporating a life insurance company into the holding company and dismissing the president of an affiliate bank. These things should be decided by the CEO and the board of directors. If the government has been throwing its weight in this way, it is a grave matter.
The government should no longer interfere in the holding company. The initial pledge was "the guarantee of autonomy and responsible management," and President Kim Dae-jung said, "The government should not intervene in bank affairs." This direction should be adhered to. The government needs to create an atmosphere in which the CEO can work with responsible dedication. It will not do if it takes the outdated course of poking its nose into the naming of the holding company's board of directors and the selection of its presidents, executives and management.
The CEO must stand his ground against unjustifiable demands from the government and politicians. He should keep in mind why at one point the argument of inviting a foreign CEO to head the holding company gained currency. In addition, he should forget about delaying restructuring until June 2002, although the government promised this to labor unions. Without revamping the workforce and the organizations that nurtured the ossified banks, nothing can be done. The CEO's leadership is of utmost importance to preventing the financial holding company, fashioned by lumping together ailing banks, from becoming itself nonviable.