Why Did KB Financial Employee Stock Ownership Association Step Up to Recommend Outside Directors?

KB Financial's Chairman Yoon Jong-kyu Likely to Secure 3rd Term
KB Financial Employee Stock Ownership Association Proposes Shareholder Motion to Appoint Two ESG Expert Outside Directors

[Image source=Yonhap News]

[Asia Economy Reporter Park Sun-mi] Attention is focused on the background of KB Financial Group's employee stock ownership association recommending Professor Yoon Soon-jin of Seoul National University Graduate School of Environmental Studies and CEO Ryu Young-jae of Sustainvest as new outside directors amid the increased possibility of Chairman Yoon Jong-kyu's third term.

KB Financial Employee Stock Ownership Association recently announced at a press conference that it plans to propose shareholders at the extraordinary general meeting scheduled for November 20 to appoint Yoon Soon-jin, a well-known expert in environment, social, and governance (ESG), and Ryu Young-jae as new outside directors.

What is the Outside Director System?

The outside director system refers to a system where experts who meet certain qualifications and are not influenced by major shareholders or management are appointed as directors to enhance corporate management transparency, prevent concentration and abuse of corporate power, improve corporate governance, protect investors' interests, and fulfill corporate social responsibility.

The apparent reason for the employee stock ownership association recommending two ESG experts as outside directors is to strengthen KB Financial's ESG management. KB Financial has emphasized ESG management to the extent of establishing an 'ESG Committee' at the regular shareholders' meeting last March, but there are criticisms that the current board lacks experts well-versed in ESG, necessitating supplementation.

Ryu Je-gang, head of KB Financial Employee Stock Ownership Association, said, "For KB Financial Group's board to professionally operate the ESG Committee, it is urgent to supplement it with genuine ESG experts as outside directors." He explained, "The KB Financial 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 the ESG Committee, this board composition is why the KB Financial board is criticized as a 'nominal ESG Committee' that only mimics ESG."

Although Recommended by the Employee Stock Ownership Association... The Head of KB Financial Employee Stock Ownership Association and the Labor Union Chairman Are the Same Person

Some analyze that since the head of KB Financial Employee Stock Ownership Association also serves as the labor union chairman, this recommendation of outside director candidates is an attempt to check the concentration of power due to Chairman Yoon Jong-kyu's third term.

Currently, Chairman Yoon is on the final shortlist of candidates for chairman, and KB Financial Group's Chairman Recommendation Committee will conduct in-depth interviews with the four shortlisted candidates on the 16th and select one final candidate through a vote by the committee members. The industry views the possibility of Chairman Yoon's third term as high.

In the shareholder proposal for the extraordinary general meeting, KB Financial Employee Stock Ownership Association explained, "Although some outside directors on the current KB Financial Group board were appointed using recommendations from shareholders, stakeholders, and external advisory institutions, the board is evaluated as lacking independence to prevent concentration and abuse of corporate power centered on the chairman based on shareholders' rights."

It added, "A new breakthrough is needed to improve KB Financial Group's governance. The KB Financial Employee Stock Ownership Association believes it has been entrusted with the historic responsibility to prevent the CEO chairman's unilateral decisions and establish sound governance through checks and balances within the board." It also emphasized, "Outside directors must objectively perform monitoring and supervisory duties over the execution of duties by controlling shareholders and executive directors from an independent position to enhance management transparency and perform internal control duties for the company's sound development, including providing advice and expertise for policy decisions."