Avoiding 'Legal Detention' Jo Yong-byeong... Shinhan Financial Resolves Governance Uncertainty

Court Sentences Chairman Cho to 6 Months Imprisonment and 2 Years Probation for Hiring Corruption
Chairman Cho Likely to Pursue More Aggressive Management Moves as Shinhan Financial Cleans Up Governance Risks

Shin Yong-byeong, Chairman of Shinhan Financial Group, is answering questions from the press before the interview with the Shinhan Financial Chairman Candidate Recommendation Committee at the Shinhan Bank headquarters in Jung-gu, Seoul on the 13th. Photo by Moon Ho-nam munonam@

[Asia Economy Reporter Kwon Haeyoung] Cho Yong-byeong, Chairman of Shinhan Financial Group, has effectively secured his reappointment by avoiding imprisonment related to allegations of hiring irregularities. With the resolution of governance and management uncertainties that had overshadowed Shinhan Financial Group for nearly two years, the management of Shinhan Financial, which has declared its leap to a 'first-class company,' is expected to gain further momentum.

The Seoul Eastern District Court on the morning of the 22nd sentenced Chairman Cho, who was accused of hiring irregularities, to six months in prison with a two-year probation.

Chairman Cho was tried on charges of giving preferential hiring to executives' children during his tenure as Shinhan Bank President from 2015 to 2016. Previously, the prosecution had sought a three-year prison sentence and a fine of 5 million won against him.

By avoiding a court-ordered imprisonment that could have completely shaken Shinhan Financial Group's governance structure, Shinhan Financial has been able to significantly alleviate concerns over governance uncertainty, which had been the group's biggest risk. If Chairman Cho's reappointment is confirmed at the shareholders' meeting in March, he will be able to serve as chairman for the next three years until 2023.

Last month, the Shinhan Financial Group Chairman Recommendation Committee decided to reappoint Chairman Cho, whose term expires in March, while simultaneously preparing a contingency plan to respond to any emergency situations. Although the plan was to switch to an acting chairman system in the event of Chairman Cho's imprisonment, there were considerable concerns about inevitable turmoil throughout the group. For this reason, the Financial Supervisory Service also met with the Shinhan Financial Chairman Recommendation Committee to express concerns about legal risks related to Chairman Cho. Within the committee and the group, while a probation sentence was anticipated, there was unease given that former Woori Bank President Lee Kwang-gu was sentenced to imprisonment for hiring irregularities.

A financial industry insider said, "Shinhan Financial could not ignore the worst-case scenario of Chairman Cho's imprisonment," adding, "With the governance uncertainty surrounding Shinhan Financial lifted, the group's management efforts to solidify its position as a leading bank are expected to become more aggressive and faster."

Although the prosecution is likely to appeal the first trial verdict, it will take considerable time until the Supreme Court's final ruling, so Chairman Cho is expected to continue his duties without difficulty.

With this ruling, Chairman Cho is expected to solidify Shinhan Financial's position as the top domestic financial group and further strengthen competitiveness in non-banking and global businesses through bold moves such as mergers and acquisitions (M&A). Under his leadership, Shinhan Financial has strengthened its non-banking sector by acquiring Orange Life and Asia Asset Trust, widening the gap with latecomers, and actively pursuing global M&A. Furthermore, following the recent Lime Asset Management scandal involving a 'Ponzi scheme,' which also affected Shinhan Investment Corp. and Shinhan Bank, Chairman Cho is expected to take a more proactive approach to crisis management, focusing on enhancing the group's risk management capabilities.