No more league of their ownThe feud at KB Financial Group barred the botched and irresponsible presence of outside board directors at financial institutions. The outside board directors teamed up with Group Chairman Lim Young-rok in the much-publicized fight with former KB Bank Chief Executive Lee Kun-ho after the latter accused the former of a misdemeanor in the process of replacing the computer system at the flagship bank network.
The two were reprimanded by the Financial Supervisory Service. Lee resigned immediately. But Lim resisted and the board directors dismissed him only under pressure from the financial authority. The board members kept to the sidelines when the power struggle between the two leaders drew outside scrutiny. Some board members reportedly advocated for Lim until the end. These members, who are as much as responsible for discrediting the reputation of the group and the entire financial industry, have been assigned to form a committee to recommend a new chairman and spearhead reform in the group.
Currently, there is no legal basis for penalizing outside board directors. KB board committee members are selected by a separate committee, comprising the group chairman and three outside board directors. In short, a group of acquaintances or candidates recommended by financial authorities share the seats among themselves. Of nine outside board seats, eight are filled by alumni of economics or business management departments of Seoul National University. Their compensation packages also are decided by them. They earn nearly 100 million won ($96,000) a year, yet without any responsibility. It is why they merely serve as gatekeepers for those arriving through revolving doors or golden parachutes.
Outside directors have long neglected their primary role of watching over the management, and requiring supervision and reform. The government last year drew up a revised law to overhaul the ownership structure in financial institutions, but the bill is still pending at the National Assembly. Authorities are considering whether to include institutionalization of an independent body to evaluate outside directors as well as a committee to recommend chief executives. Instead of making tweaks here and there, authorities should re-examine the overall system for a comprehensive reform plan. Management disorder could recur if the playing field is entirely left up to the players.
JoongAng Ilbo, Sept. 22, Page 38