The mess at KB
The history of KB Financial Group, which has been plagued with one scandal after another from revolving-door executive appointments over the last eight years, implicates one person. Lee Kyung-jae has been an outside director on the nine-member board of the country’s largest financial group for the last five years. He has handpicked three chairmen of KB Financial - Euh Yoon-dae, Lim Young-rok, and the latest, Yoon Jong-kyoo. The two former chairmen had to exit in disgrace after much-publicized power struggles, pulling down the bank’s reputations as well as their own. The newly appointed captain also faces a rocky voyage.
In naming Euh, former dean of Korea University and a close ally of former President Lee Myung-bak, Lee said he was born to be a financial chairman. He vehemently denied that there had been any influence from the presidential office or the financial authority, brushing aside criticism of a typical parachute appointment from on high. Lee has been dubbed a genius from the Bank of Korea and praised for his character traits of righteousness and modesty. He has been given the accolade, “The gentleman from the financial business.” Euh mostly taught finance. His experience in the field was limited to the Bank of Korea’s Monetary Policy Committee. But he got the job despite questions about his credentials thanks to Lee’s recommendation.
What happened afterwards was a disaster. Lee and Euh fought like cats and dogs. Euh’s ambitious attempt to acquire ING Life Insurance was derailed largely because of Lee’s opposition. Lee replaced Euh with Lim, who was glad to gang up on the outgoing chairman. Lee said Lim was the best candidate to steer the group out of the turmoil created by Euh, having served as the president of KB Financial for three years.
But the same sort of messy, in-house house feud continued in the following year.
Lee also played a large role in the appointment of Yoon to replace the ousted Lim. He was hospitalized when the board was deciding between Yoon and Citibank Korea CEO Ha Yung-ku for the chairman’s position. Lee left the hospital to throw his vote behind Yoon, a former chief financial officer of the group, making him the first KB insider to make the leap from executive to chairman. But just because he has served in the bank as an executive does not make him a genuine “insider.” He was the least eligible among the four finalists for the position. Yoon received a heavy penalty by the financial regulator in 2004 for cooking account books during the merger of Kookmin Card. A person who has been penalized in such a way cannot hold an executive position at a financial institution for three years.
In an industry in which creditability is everything, a person who has been disgraced for corruption should not be able to expect to find a job in the field ever again. Finance is a profession that should prize ethics more than any other job because people working in the industry are trusted with customers’ money. The Financial Holding Company Law stipulates that the qualification for executive position excludes anyone who “hurts the company’s interests, integrity of management, and financial order.” Some people, however, said the financial authority was too harsh at the time and that Yoon was a scapegoat.
Lee, who was a financial bureaucrat supervising the banking sector, expressed full confidence in Yoon without any mention of his past disgrace. One industry official wondered how KB, which is listed on the New York Stock Exchange, had not considered the way a new CEO with an accounting fraud record would look in the eyes of the U.S. Securities and Exchange Commission. Can anyone have full trust in a financial brand run by a person with such a creative accounting record? Outsiders wondered whether connections are the key to appointments at KB Financial. There is one way to debunk these worries and speculation. Lee Kyung-jae must step down. Otherwise, he and other board members will be suspected of seating chairman they can influence to maintain their high-paying jobs.
Lee has been resisting advise to resign even though he let the power struggle between former chairman Lim and Kookmin Bank CEO Lee Kun-ho get out of control, which eventually led to the two’s dismissal. He may have his reasons and excuses. He must not like authorities meddling in the bank’s affairs. He may feel he has done nothing wrong. He must look at the bigger picture. The union has already taken advantage of the power vacuum, demanding overtime allowances. If Lee really trusts Yoon that much, he should let him do his job. KB can be saved if Lee leaves. Or he may end up ousting his third chairman.
JoongAng Ilbo, Nov. 6, Page 34
*The author is an editorial writer of the JoongAng Ilbo.
by Yi Jung-jae