Successions matterThe chief executive of Hana Bank, Kim Jung-tai, will take the helm of Korea’s second-largest financial holding company after Kim Seung-yu announced he will step down and end his 47-year career at the bank. Kim, a founding member of Hana Bank who served as chairman since the bank became a financial holding company in 2005, not only turned the small bank into one of the largest in the country but also contributed greatly to the country’s banking industry in the process.
The smooth leadership transition at Hana is a relief to the industry after the scandalous power struggle among top executives at Shinhan Financial Group that ended in all of them, including Chairman Ra Eung-chan, being forced from their posts. Kim Seung-yu and Ra were the country’s longest-serving financial CEOs. If Kim also resisted resigning, Hana would have invited state interference in its management. A leadership feud at KB Financial Group in 2009 ended after authorities named a new chairman. Hana’s Kim, therefore, should be applauded for his graceful exit.
But the transition at Hana was not entirely satisfactory. A year ago, the group drew up a plan for succession. The board was to interview candidates and name one as CEO after a process of competition. But the plan did not work out. The group scurried to find a new CEO only a few months before Kim was to retire. A promising candidate bowed out, and an outsider was rumored as a possible candidate. The succession process was muddy. Other financial holding companies should learn a lesson by establishing a planned and predictable succession system.
Without mature leadership systems, local financial companies cannot evolve into global brands like Samsung because internal management feuds can spur state interference. For example, three of the five financial holding group chairmen are close to the Lee Myung-bak government.
Established succession programs can ensure sustainable and stable progress in the financial industry. The industry remains underdeveloped because top executives lead operations with short-term visions and strategies. Prepared successions can make up for such shortcomings because the CEO-in-waiting will be expected to proceed with the strategies of his or her predecessor.
American financier Warren Buffett trained and tested four apparent heirs before naming one. Fostering successors is one of the most important roles of a CEO because a company develops under good leadership.