Woori defies regulators, reappoints the chairmanWoori Financial Group Chairman Sohn Tae-seung was reappointed by the board Wednesday despite a reprimand from the regulators that forbids him from holding that position.
The appointment sets the stage for a legal battle between one of Korea’s largest financial institutions and the government.
“The board concluded it is hasty to express an opinion when the Financial Services Commission (FSC) hasn’t finished its process and an official notice hasn’t been sent,” the board said in a release. “We concluded that there is no reason to change what’s been already decided regarding the corporate governance.”
The board agreed last year to nominate Sohn as the sole candidate for the chairmanship.
On Jan. 30, the Financial Supervisory Service (FSS) sanction committee recommended a formal reprimand of Sohn for the mis-selling of derivative-linked funds. It said that the proper information wasn’t provided to investors who may not have been familiar with the underlying assets and may not have fully understood the risks of the instruments in which they were investing. It noted the lack of internal monitoring systems at Woori.
The subject of a reprimand from the FSS can be barred from working in the industry for up to five years. The committee also recommended a partial shutdown of the institution and a penalty.
Hana Financial Group Vice Chairman Ham Young-joo was reprimanded by the committee as well and for the same reasons.
On Feb. 2, FSS Chairman Yoon Suk-heun approved of the sanctions, saying “the committee’s decision is fair and logical.”
According to Korea’s Financial Holding Company Act, an FSS chairman can directly sanction executives. When taking action against an institution, a final approval is needed from the FSC.
The sanction will go into effect if the FSC formalizes the recommendation, which is expected in the first week of March.
Securities analysts expect Woori Financial Group to take legal action against the FSS, possibly filing an injunction, if the official notice is delivered before Sohn’s reappointment is finalized at the general shareholder meeting scheduled for March 24. Taking legal action could put a hold on the sanction.
The board also said it would resume the process of electing the next CEO for Woori Financial Group’s banking unit. A meeting was held on Jan. 31, a day after the FSS reprimanded Sohn, but the meeting ended inconclusively due to the uncertainty created by the reprimand.
BY JIN EUN-SOO [firstname.lastname@example.org]