Avoiding Legal Imprisonment Allows Chairman to Serve... Focus on Whether Governance and Management Uncertainties Will Be Cleared
[Asia Economy Reporter Haeyoung Kwon] The first trial verdict on Chairman Cho Yong-byeong of Shinhan Financial Group regarding allegations of hiring irregularities will be announced on the 22nd. The key issue is whether he will be detained in court. Depending on the court's ruling, the financial sector is on high alert as it will determine whether Shinhan Financial can wash away governance risks and achieve management stabilization or enter an emergency management system amid turmoil.
According to the financial sector on the 22nd, the Seoul Eastern District Court will deliver the first trial verdict at 10 a.m. on the same day regarding Chairman Cho, who is accused of hiring irregularities.
Chairman Cho is accused of giving preferential hiring to children of senior executives during his tenure as Shinhan Bank President from 2015 to 2016. Previously, the prosecution requested a sentence of three years in prison and a fine of 5 million won for Chairman Cho.
If Chairman Cho avoids detention in court, it is expected that a significant portion of Shinhan Financial's governance risks will be resolved. The management uncertainty that has been tightening around Shinhan Financial will dissipate, and Chairman Cho will be able to focus solely on management, including expanding non-bank sectors.
Even if he receives a prison sentence including probation or more, Chairman Cho can retain his position as chairman. Last month, Shinhan Financial's Chairman Recommendation Committee decided to renew Chairman Cho's term, which expires in March. Therefore, Shinhan Financial's position is to seek the Supreme Court's judgment if a prison sentence or higher is imposed. Since it takes considerable time until the Supreme Court's final ruling, it is expected that he can continue to perform his duties as chairman.
However, if detention in court occurs, it will be difficult for him to maintain the chairman position. According to the contingency plan for an emergency situation, the chairman's duties will be taken over by an acting chairman, and Shinhan Financial as a whole is expected to fall into confusion.
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