KB financial mess a warningThere seems to be no end to the dreary and ugly leadership fiasco at KB Financial Group. Chairman Lim Young-rok was penalized by the financial regulator for causing an internal feud earlier this month.
When he refused to voluntarily step down, the Financial Services Commission suspended him for three months, sending him a de facto dismissal note. Lim reiterated that he would not resign.
Angered by his defiance, Financial Services Commission Chairman Shin Je-yoon reportedly asked the board to pressure him to leave. KB Financial Group held an emergency board meeting and advised Lim to step down for the sake of the financial group’s stability.
Lim must pave the way for the country’s largest financial group to normalize its operations. He may have his reasons for being bitter and resentful, but emotions must not get in the way of corporate management.
As long as Lim stays, the financial group cannot have a fresh start. Shares plunged more than 5 percent on Monday to below 40,000 won ($38.59). Foreign institutional players led the selling spree. It seems even the market can no longer stand the in-house feud of the financial group.
Financial authorities are partly accountable. They planted the seed for conflict by seating an outsider at the top. The power struggle between leaders selected from the outside and the inside led to the disgraceful feud.
Yet the saga may never end. There is already talk of candidates to replace Lim. As long as bureaucrats have a hand in appointments, there is no future in Korean finance. Authorities must cut the ties between bureaucrats and financiers and end “revolving door” practices.
The ownership structure of financial groups demands overhaul. Outside board members are authorized to recommend and select heads of financial groups because they, in turn, did not have a single corporate owner after having been privatized.
But this process has led to controversial choices. There must be a mechanism to block unqualified candidates from running financial institutions. If the financial sector collapses, the economy could be ruined. We should not let the painful mistake of the Asian financial crisis 17 years ago repeat itself.