[Viewpoint] The ‘election’ of Kookmin’s CEOKB Financial Group has been the main topic of conversation in the financial industry these days. Its competitors were initially worried about the arrival of a heavyweight who was appointed to steer the leader in Korea’s lending business.
“But it seems we don’t have to worry,” a chief executive of a bank said in a gathering of financial executives recently.
The first wrong step made by new KB chairman, Euh Yoon-dae, was in his appointment of a new head of Kookmin Bank. He proposed to let the bank employees pick their president.
According to the executive at the recent gathering: “Whoever is selected, he is bound to be under the mercy of the unionized employees. To pick the bank president through a popular vote is absolute nonsense.”
His point was that a president who is bound to his own employees won’t be able to push forward with the rigorous restructuring the giant bank desperately needs.
A week ago, KB distributed a ballot with 12 candidates for the Kookmin presidency to 1,300 selected staff members. The chairman plans to pick one out of three finalists short-listed in the canvass.
Euh’s idea was to allow staff participation in order to silence complaints from union members, and at the same time, to choose a new president from the outside to avoid any criticisms of favoritism.
As ingenious as the idea may be, at the same time it’s very risky. It’s best that he drops the plan altogether, because it has disaster written all over it.
First of all, the process started off on the wrong foot. Direct voting should be fair and transparent. It’s totally unclear how the 12 candidates were selected or how the 1,300 voters who represent the employees were selected from among the staff.
A KB official said the 12 candidates came from names mentioned in media reports whenever the appointment season comes around. If so, that’s a very cliched way of doing business.
Moreover, none of the candidates had been asked if they wanted to be in the running for the post. Euh could be proposing candidates who have no intention of taking the job.
The selection of the 1,300 voters was also ambiguous. KB has 21,993 staff, including temporary workers, but only 6 percent were given the chance to vote. KB officials refused to elaborate on their selection criteria.
Secondly, such a method of appointment can only aggravate a factional split in the organization. Since the merger of Kookmin Bank and Housing Bank in 2001, a unique rule of thumb has dominated the bank’s appointments.
Posts are appropriated separately to former Kookmin Bank and Housing Bank employees. As a result, a lot of lousy appointments have been made.
The factional problem decreased slightly with the creation of a labor union in 2004, but nevertheless the split affects the bank’s operations.
Euh’s popular vote has exposed and accelerated the tug of war between the various factions, which, for instance, have been meeting separately to get backing for the candidates they support.
It’s obvious how this will play out. The panel of 1,300 voters will vote for candidates based on their allegiances in the bank rather than their ability. A former employee of the bank says the vote has turned what was a truce into an all-out war.
Thirdly, the bank cannot achieve necessary restructuring via such a process. KB Financial desperately needs to go on a diet. The group is the largest by number of staff, but last in productivity.
Yet the employees are paid the same as employees at profit-making banks. The group has to steel itself for a fight with the labor union if it adopts austerity measures or wants to downsize.
What is needed is an uncompromising leader, not someone who is crowned by unionized employees. Euh has already promised not to force a restructuring.
In return, the labor union withdrew its court petition seeking to oust Euh from office, happy that the new chairman recognized the union as a partner.
Fourth, the vote could set a poor precedent, as other labor unions can now make similar demands that they also be permitted to select presidents. Future management may have to plead with labor unions to get appointed.
Lastly, there is the problem of CEO risk. Banks will never know what kind of ingenious schemes their chairmen will come up with next.
Euh, who said he’d bid to acquire Woori Financial Group, rescinded his words when his comment drew criticism. If the next CEO is as unpredictable, the organization is bound to slip into a weird kind of limbo.
KB has begun counting the votes for the Kookmin presidency. It pledged absolute confidentiality over the process. If you ask me, it should secretly chuck the whole exercise away for the sake of the bank and the broader financial industry.
*Translation by the JoongAng Daily staff.
The writer is business editor of the JoongAng Sunday.
By Yi Jung-jae