Rapid Progress in Labor Union-Nominated Directors System in Financial Sector... KB Financial Employee Stock Ownership Association Recommends 2 Members (Comprehensive)

Professor Yoon Soon-jin of Seoul National University Graduate School of Environmental Studies and CEO Ryu Young-jae of Sustainvest Recommended
"True ESG Experts"
Claiming to Differ from the Labor Union-Recommended Director System...
Financial Sector Sees It as a Movement for Full Expansion of the Labor Union-Recommended Director System

[Asia Economy Reporter Sunmi Park] KB Financial Group’s employee stock ownership association is accelerating the introduction of a labor union-nominated director system in the financial sector by recommending two environmental, social, and governance (ESG) experts as outside director candidates.

On the 10th, KB Financial’s employee stock ownership association announced at a press conference held in front of its headquarters at 10 a.m. that it plans to propose shareholders’ proposals at the extraordinary general meeting scheduled for November 20 to appoint Professor Yoon Soon-jin of Seoul National University’s Graduate School of Environmental Studies and CEO Ryu Young-jae of Sustainvest as new outside directors.

This is the fourth attempt following two rejections and one voluntary withdrawal between 2017 and 2019. Ryu Je-gang, head of KB Financial’s employee stock ownership association, stated, “For KB Financial Group’s board of directors to operate the ESG committee in a substantial and professional manner that sets an example for others, it is urgent to appoint genuine ESG experts as outside directors.” He added, “Therefore, at the November extraordinary general meeting, we intend to directly recommend two outside director candidates who can properly realize the purpose and intent of the outside director system by receiving mandates from shareholders.”

The outside director candidate recommended by the employee stock ownership association, Yoon Soon-jin, is a professor at Seoul National University’s Graduate School of Environmental Studies, and the candidate Ryu Young-jae is the CEO of Sustainvest, a consulting firm specializing in socially responsible investment, ESG, and shareholder activism established in 2006.

What is the background for recommending outside directors?

Ryu, the head of the association, introduced both candidates as “top-level ESG experts in Korea” and explained, “KB Financial’s board consists of seven members: two in financial management, one in finance, one in accounting, one in law and regulation, one in risk management, and one in consumer protection. Despite the progressive step of establishing an ESG committee, this board composition is why KB Financial’s ESG committee is criticized as a ‘nominal ESG committee’ that is merely for show.”

KB Financial’s employee stock ownership association claims that this recommendation of outside directors aims to enhance management efficiency and transparency and emphasize ESG management, asserting that it differs from the labor union-nominated director system and the labor director system. They emphasized that it is not intended to increase the protection of workers’ rights.

However, industry insiders view that since Ryu Je-gang concurrently serves as the labor union chairman, this recommendation of outside director candidates aligns with the direction of the labor union-nominated director system. It is reasonable to say that KB Financial’s employee stock ownership association’s recommendation of outside director candidates is reigniting the labor union-nominated director system in the financial sector.

The appointment of Park Hong-bae, chairman of the Financial Labor Union who has emphasized labor union participation in management, as a nominated supreme council member of the Democratic Party increases the likelihood of the labor union-nominated director system becoming more active in the financial sector. President Moon Jae-in pledged the labor director system, which includes workers on the board, as an election promise, but practically, the labor union-nominated director system, which is easier to agree upon between labor and management, is more likely to be implemented first.

Labor union-nominated director system spreading throughout the financial sector
Political circles also joining

Currently, in the financial sector, besides KB Financial preparing for the November extraordinary general meeting, state-run banks such as IBK Industrial Bank of Korea and financial public enterprises like Korea Asset Management Corporation (KAMCO) are also in an environment where the labor union-nominated director system is gaining momentum as their outside directors’ terms are about to expire.

IBK Industrial Bank of Korea is facing the expiration of two outside directors’ terms between February and March next year, and labor and management have already agreed to actively discuss and promote the labor union-nominated director system with related organizations. IBK Bank President Yoon Jong-won and the IBK labor union agreed earlier this year on six agenda items, including the introduction of the labor union-nominated director system.

Also, KAMCO’s outside directors’ terms expire in November, opening the possibility for the labor union to re-push for recommending outside directors. Woori Bank’s employee stock ownership association and labor union have consistently expressed their intention to recommend outside director candidates, so once the remaining shares sale process is completed, it is expected that the labor union’s recommendation of outside director candidates will begin in earnest.

The political sphere has also joined. On the 14th of last month, Democratic Party lawmaker Park Joo-min proposed an amendment to the Public Institutions Management Act to introduce the labor director system in all public enterprises and quasi-governmental institutions nationwide. At the press conference for KB Financial’s employee stock ownership association’s outside director candidate recommendation, Democratic Party lawmaker Min Byung-duk attended in person to support the association’s claims.