Bankers increasingly under the gun

General managers of local banks said the recent suicide of a banker at Standard Chartered Korea was hardly a surprise given the recent changes in the financial industry that ramp up pressure and performance-related expectations on top executives.

This year in particular, bankers have been given high sales targets to meet despite a punishing economic climate that is seeing the public tighten its collective purse strings as the decelerating global economy takes its toll.

Further tightening the screw, Standard Chartered Korea has yet to resolve a disagreement between its management and labor union over personal evaluations of workers. The bank last year announced that it would be adopting a new system that decides wages based on merit and performance rather than years worked. This has sparked the longest-running labor dispute in the history of Korea’s financial market.

Although the union has returned to work, the issue remains up in the air.

This new performance-driven system led a general manager of the bank, identified only as Cho, to jump to his death from the 16th floor of his apartment building in Yongin, Gyeonggi, on June 18. The police said that Cho, who had worked for the bank for 30 years, left a suicide note explaining that he was struggling at work. He said he wished his life was “a bad dream” rather than a real torment. Cho’s family said he had been unable to sleep due to the immense pressure he was under.

The bank’s union insisted that the bank’s failure to collect overdue loans and the decision to disclose employees’ performances drove Cho to his death. The union said the performance-based evaluation was the biggest single factor that led to his suicide.

Industry insiders said the case shines a spotlight on relentless pressure facing bankers in the country today.

Loss of face

A general manager who wished to be identified only as Park starts his day checking key performance indicators that pop up on his computer. These show how his branch is doing relative to the rest of the bank’s network.

“They show everything: The total amount of bank accounts, loans and credit cards our branch workers have issued; the number of consumers who have signed up for Internet banking; the delinquency rate of loans in real time,” Park said. “Everything.”

“Even if we manage to meet our six-month performance target, the next one is set even higher, regardless of the state of the economy,” he said. “I assume Cho was depressed by the daily checkups he was subjected to and the performance pressure he was under.”

A man surnamed Jeon who works as a general manager of another local bank said that most of his colleagues take the performance indicators as a warning.

“Each general manager is evaluated twice a year, and if he fails to meet the sales target two or three times in a row, he will get a poor grade and probably be demoted,” Jeon said.

“This is a policy that most banks adopt. Poor performing general managers get relegated to nondescript offices with aging computers, and only those who show improvement get back to their [more senior] posts.

“They feel terribly ashamed and distressed due to the loss of face. In some cases, they even require psychological treatment - which is what happened to me - while others quit.”

The Korea Financial Industry Union said that a growing number of bankers are taking sick leave, a sign of the growing stress they face. A survey conducted in July 2011 for the previous year showed that a total of 151 employees took sick leave, more than double the 71 who did so in 2003.

“This is fairly clear proof that bankers are dealing with a greater workload and more stress,” said Jang Jang-hwan, vice chairman of the union. “Long working hours and excessive performance pressure harms both their mental and physical health. We believe that even more employees took sick leave than our research showed as we didn’t include staffers at Kookmin or Standard Chartered banks, both of which were on strike at the time.”

Other factors at play

A senior official at Standard Chartered Korea said the bank will do all it can to assist Cho’s family, including providing financial support, but that it may not be fair to blame the job solely for his death.

However, Kim, who works as a general manager at another bank, said there is a strong sense of competition among his peers. Kim won a 12-day trip to Europe with his wife and a generous bonus after he posted the highest sales at his bank four years ago.

But he said that high achievers can quickly become victims of their own success.

“Strangely, many bankers choose not to beat their banks’ performance targets. They would rather stay in the middle ranks because, when they fulfill their goals, they are given even higher targets,” Kim said, adding that it’s next to impossible to win the best-sales award two years in a row for this reason.

Such policies as these are effectively hamstringing the industry and “preventing employees from achieving their full potential,” he added.

Most banks organize meetings with poor performing general managers three times a month and require them to give speeches in front of their peers explaining how they will make up their losses.

According to standard performance ratings by a local bank, the top 10 percent of general managers by sales receive a bonus equivalent to 160 percent of their basic annual salary. In contrast, the bottom 10 percent will have their basic salary reduced by more than one-third, or 40 percent, from the following year. This effectively puts the worst performers on a lower salary than entry-level bankers.

Cho was not the only executive to fall foul of such an unforgiving system, and family members can also suffer.

Three years ago, the wife of a banker surnamed Kwon committed suicide after she failed to pay back money she borrowed in a bid to help improve her husband’s performance at work. The wife asked relatives to lend her money and vowed to repay them with healthy returns as her husband was going to invest the money in mutual funds. Then the stock market plunged and, due to the shame and heavy censure from her relatives, the woman took her own life.

Realistic targets

Industry insiders said that both the government and banking sector should come up with measures to remedy the situation.

“Banks should seriously consider issuing more reasonable performance targets that reflect the country’s annual economic growth figure,” Kim said. “Currently, banks assign targets one to two percentage points higher than economic growth.”

An official at the Korea Financial Industry Union said bank executives should “refrain from making offensive remarks about poor-performing employees, enhance their quality of life by rolling out a package of welfare programs and let healthy competition build more naturally among employees.”

By Kim Mi-ju [mijukim@joongang.co.kr]