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Salaries of Korean Bank CEOs Too High
Unbalanced Compensation
Salaries of Korean Bank CEOs Too High
  • By matthew
  • September 29, 2014, 09:02
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Stacks of South Korean won for delivery to commercial banks at the Bank of Korea’s headquarters in Seoul.
Stacks of South Korean won for delivery to commercial banks at the Bank of Korea’s headquarters in Seoul.

 

Korean banks pay significantly higher annual salaries to their CEOs than American and Japanese banks do, although the former fall behind the latter in every aspect, including size and performance. 

For example, Chairman Takamune Okihara of the Mitsubishi UFJ Financial Group, the largest financial institution in Japan, received a total of 121 million yen (US$1.11 million) last year. Mitsubishi UFJ president Nobuyuki Hirano was paid 125 million yen (US$1.14 million) during the same period. Sumitomo Mitsui Financial Group Chairman Masayuki Oku and president Koichi Miyata received 122 million yen (US$111 million) and 128 million yen (US$117 million), respectively. Yasuhiro Sato, head of the Mizuho Financial Group, took 116 million yen (US$1.06 million) in 2013. The amounts are easily eclipsed by the salaries of the CEOs of Korean financial groups.

Hana Financial Group Chairman Kim Jung-tae took 900 million won (US$854,361) in base pay alone last year. But the total amount of his compensation increases to 2.64 billion won (US$2.50 million) when his performance-based stock options are taken into account. “The stock options, though granted last year, are actually paid in 2016 with the business indices for the three previous years taken into consideration,” the company explained, adding, “Therefore, the size depends on future business performance and stock price.”

In the Shinhan Financial Group, Chairman Han Dong-woo was paid 1.4 billion won (US$1.33 million) in base pay and bonuses and 1.42 billion won (US$1.34 million) in performance-based stock options, while Shinhan Bank President Seo Jin-won received 1.31 billion won (US$1.24 million) in base pay and bonuses and 1.58 billion won (US$1.50 million) in performance-based stock options. The KB Financial Group’s former Chairmen Eo Yoon-dae and Lim Young-rok, in the meantime, took 1.35 billion won (US$1.28 million) in base pay and bonuses along with 880 million won (US$759,448) in stock options together. 

Last year, the Hana Financial Group recorded total assets of US$28 million and pre-tax net profits of US$1.2 billion. The sizes were US$29.5 million and US$2.5 billion for Shinhan and US$27.7 million, and US$1.7 billion for KB. They were the 84th, 69th and 68th largest financial companies in the world on an equity capital basis. Meanwhile, Mitsubishi UFJ’s assets and net profits were US$2.451 trillion and US$14.7 billion in 2013, those of Sumitomo Mitsui were US$1.534 trillion and US$13.5 billion, and that of Mizuho US$1.67 trillion and US$9.4 billion. They took 10th, 17th and 21st places globally.

The CEO salaries of the Korean financial groups were even higher than those paid to the heads of leading American commercial banks. Although Wells Fargo and the Citigroup paid US$7.93 million and US$7.72 million to their CEOs, the Bank of America only gave its CEO US$2.26 million. They were the eighth, sixth, and fourth largest financial companies in the world last year with net profits of US$32.3 billion, US$19.7 billion, and US$16.2 billion. 

“I recently met some officials in the Japanese financial authorities, and all of them were astonished to hear about the amount of the salaries,” said a local official, continuing, “It is definitely a problem that the heads of the local financial groups take the huge salaries and perks without bearing sufficient responsibility.”