[Person人] Kakao Bank's Lee Yong-woo Giving Up Billions in Stock Options to Gain Public Support

Key Financial Figure Behind Kakao Bank's Success, Will They Also Break Norms in Politics?
If Elected, Second Private Sector Financial Expert to Enter Politics
Expected to Play Role in Financial Policy and Pledges for the Democratic Party

Lee Yong-woo, former co-CEO of Kakao Bank

[Asia Economy Reporter Jin-gyu Lee] "The process of preparing KakaoBank (K-Bank) was about breaking the common sense we had. We questioned what was considered obvious in the financial sector from an Information and Communication Technology (ICT) perspective and prepared with a completely different mindset."

Can Lee Yong-woo, former co-CEO of K-Bank (55), who broke the common sense in the financial sector and created the K-Bank myth, break the common sense again in politics? At the launch of KakaoBank held in July 2017 at Sebitseom in Seocho-gu, Seoul, Lee repeatedly emphasized, "We must break the common sense we have." Now, two and a half years later, he is preparing to break the common sense not in finance but in politics. On the 13th, he stepped down from the CEO position of K-Bank and gave up 520,000 stock options (exercise price 5,000 KRW per share) that could have yielded tens of billions of won in capital gains to enter politics.

Known as a veteran in strategy and investment with deep experience in the financial sector, Lee chose the path of pursuing innovation through an internet-only bank, breaking free from the constraints of the financial sector. In July 2017, when the term "internet-only bank" was somewhat unfamiliar to the general public, he launched K-Bank, the second internet-only bank in South Korea following K-Bank. Within two years after the launch, he personally proved that breaking the existing common sense was not reckless but innovation by achieving profitability and surpassing 10 million customers.

◆ From Financial Expert to ICT Field = Lee is a seasoned veteran in the financial sector. He is recognized for his expertise in financial institution operations and investment strategies. Born in 1964 in Chuncheon, Gangwon Province, he spent his school years in Busan. He followed an elite path in economics, entering Seoul National University’s Department of Economics in 1982, one year junior to Kim Sang-jo, the current Chief of the Blue House Economic Office. He earned both his master's and doctoral degrees in economics from the same university’s graduate school. Afterward, he joined Hyundai Economic Research Institute in 1992 and accumulated experience in various roles including Hyundai Group’s General Planning Office, Dongwon Securities Executive Director and Head of Strategic Planning, Korea Investment Holdings Strategic Planning Director, Korea Investment & Securities Asset Management Head, and Chief Investment Officer at Korea Investment Trust Management.

However, his perspective was not confined to the financial sector. About 20 years ago, while working at Hyundai Economic Research Institute, he served as secretary to Jang Jae-sik, former lawmaker of the Millennium Democratic Party and father of Jang Ha-joon, a professor at the University of Cambridge. During the 1997 15th presidential election, he contributed to drafting economic policies for then-candidate Kim Dae-jung.

Later, he expanded his scope to the ICT field through K-Bank. In 2015, he became co-CEO of K-Bank at its launch, leading the internet-only bank. Alongside co-CEO Yoon Ho-young, a former Kakao executive and an expert in the convergence of finance and IT, he spearheaded the establishment of K-Bank. Within two years of its launch in 2017, they achieved profitability and surpassed 10 million customers. As an investment expert, Lee formed a highly synergistic partnership with Yoon, the finance and IT fusion specialist.

◆ Will He Become the Second Lawmaker from Private Finance? = Lee, who wrote the K-Bank myth, is attempting to break common sense again in politics. His recruitment as the 7th talent by the Democratic Party for the 21st general election has drawn attention to whether he can serve as a lawmaker from the private financial sector. At the party admission ceremony on the 13th, he stated, "I am a fairly successful CEO who has led companies with innovation. Now, I want to realize the innovation I experienced on the ground in politics."

However, it has not been decided whether he will run as a proportional representative or in a constituency. When asked if he had considered which constituency to run in, Lee replied, "That is something I need to discuss with the party." If elected in this general election, he will become the second lawmaker from the private financial sector after former lawmaker Lee Sung-nam, who came from Citibank. Until now, lawmakers from the private financial sector, excluding financial regulators or union members, have been rare in Yeouido.

Lee is expected to play a role in formulating financial pledges and policies within the Democratic Party. He emphasized, "Having been on the ground for 30 years, I understand well how the government’s policies are received and responded to in the field. Now it is time to give back what I have learned through laws and systems for society." Meanwhile, by joining the Democratic Party, he also gave up 520,000 K-Bank stock options. Given the exercise price of 5,000 KRW per share, the industry estimates that he relinquished capital gains worth at least 2.6 billion KRW.

◆ How Will K-Bank Fill Lee’s Vacancy? = As Lee, who has led K-Bank for about four years since before its launch, suddenly moves to politics, his absence at K-Bank seems significant. Lee, who led the company from the consortium stage when K-Bank received preliminary approval as the second internet-only bank in 2015, stepped down from the CEO position on the 13th after about four years. Accordingly, co-CEO Yoon will temporarily serve as the sole CEO. K-Bank has not yet decided whether to appoint a new co-CEO during Lee’s remaining term until January next year or to switch from a co-CEO system to a single CEO system. Considering Lee’s career, the co-CEO system now lacks a financial expert. Although decisions were likely made jointly by the two CEOs, Lee’s long experience in finance meant he was the expert handling financial matters.

Meanwhile, recent changes with Kakao becoming the largest shareholder of K-Bank have drawn attention to how this will affect K-Bank’s governance. As the name suggests, K-Bank is an internet-only bank led by Kakao, but for a while after its launch, Korea Investment Holdings held 50% of the shares, making it the largest shareholder. Following the Internet-only Bank Special Act last November, Kakao ultimately became the largest shareholder of K-Bank. Kakao holds 34% of K-Bank shares, while Korea Investment Holdings’ stake dropped from 50% to 34% minus one share. If K-Bank moves to a single CEO system led by a Kakao executive in the future, this could be seen as a move reflecting these changes in shareholding structure.