Intense salary scrutinyThe Financial Supervisory Service will launch a further inspection of the wage and compensation systems of financial holding companies and banks starting next month, an official from the country’s financial regulator said yesterday.
“Since 2010, we have been examining whether or not [financial institutions] are abiding by the [government’s] guideline of paying wages and compensation to employees, including executives, based on their performance,” said the official. “This year, we conducted a regular examination in May and June and we plan to conduct an additional inspection starting next month.”
According to financial industry sources, when the FSS conducted its two-month regular examination, it found financial institution compensation isn’t based on performance and although their net profits dropped last year, some director-level executives received higher annual salaries.
Financial institutions have been suffering from lower profits mainly due to the sluggish economy, low interest rates and a saturated local market. To overcome such challenges, financial institutions have been targeting overseas markets.
“Banks are required by law to publicly notify the financial regulator of their wage and compensation records,” the official said. “We will carry out an inspection into whether or not they fully complied.”
The FSS move comes after its governor, Choi Soo-hyun, told reporters last week the agency will look into the performance-based compensation system in the financial industry.
“If their business performance isn’t good, their compensation should also go down,” Choi said. “But if we look at how much high-level executives at financial institutions receive every year, [it’s very high].”
A focus of the scrutiny is Euh Yoon-dae, chairman of KB Financial Group, who will leave his position next month. When financial chiefs step down, they are guaranteed “stock grants” based on their performance. The maximum amount Euh is expected to receive is estimated at 1.8 billion won ($1.5 million).
BY LEE EUN-JOO [firstname.lastname@example.org]
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