Proxy Advisors Raise Objections
Institutional Shareholder Services (ISS), Glass Lewis and Korea Corporate Governance Service (KCGS) raised objections to former Export-Import Bank of Korea vice president Kim Young-soo becoming an outside director in KB Financial Group. He is a candidate recommended by the KB Financial Group union.
KCGS said in its report on March 16 that his appointment is likely to affect business independence. “From May 2018 to November last year, the former vice president was an executive director in charge of investment projects at the Korea Overseas Infrastructure and Urban Development Corporation of the Ministry of Land, Infrastructure and Transport,” it said, adding, “In other words, until recently, he was an affiliated person in a corporation in business relations with the group.”
In addition, KCGS said that its objection is also because he is a union-recommended candidate. “Shareholders pursue growth and profits by taking investment risks whereas rewards for employees are fixed and, as such, there is a fundamental clash of interests,” it said.
This is the fifth time that the union recommends an outside director. All of its previous recommendations in 2017 to 2020 ended without any success. At present, approximately 70 percent of KB Financial Group is owned by foreign investors, who are influenced by the opinions of ISS and Glass Lewis. The largest shareholder is the National Pension Service, which owns 9.77 percent and may be influenced by KCGS.
In the domestic financial sector, the Export-Import Bank of Korea is currently the only case in which a union-recommended candidate has become an outside director. The second case is likely to be the Industrial Bank of Korea. There, two outside director positions will become vacant at the end of this month and the union already recommended three candidates.
The National Assembly passed a revised bill in January so that the appointment of a union-recommended non-executive director becomes mandatory on July 1 at every public institution. Private financial companies, however, are still refusing to follow.