Hana Financial Group's Nomination Committee Fully Activated... Growing Support for 'Kim Jung-tae's Reappointment'

Major Candidates Face Legal Risks
Voices Also Raise Possibility of Chairman Kim's Reappointment

Kim Jung-tae, Chairman of Hana Financial Group

Chairman Recommendation Committee Starts Later Than Last Year... No Expected Disruptions

[Asia Economy Reporter Kiho Sung] As the final candidate for the next chairman of Hana Financial Group is expected to be decided within this month, the possibility of reappointing the current chairman Kim Jung-tae is gaining momentum. This is due to the perception that stable leadership is needed amid increased uncertainties caused by COVID-19 and the fact that all leading candidates face legal risks. Additionally, achieving record-breaking performance last year, surpassing the highest results since the establishment of the holding company, is also seen as a positive signal.

According to financial circles on the 15th, Hana Financial Group will officially activate the Chairman Recommendation Committee (CRC) this week and begin the process of selecting the next chairman. The CRC is composed entirely of outside directors except for Chairman Kim. The eight members include Chairman Yoon Sung-bok, Professor Park Won-gu of Seoul National University, Professor Cha Eun-young of Ewha Womans University, Baek Tae-seung, President of the Korea Internet Law Association, and Professor Heo Yoon of Sogang University.

This year's CRC activities are somewhat delayed compared to previous cases. In 2018, the first meeting was held on December 22, 2017, and the final candidate was decided on January 22 of the following year. However, Hana Financial Group explained that the final candidate will be appointed without any issues before the shareholders' meeting scheduled for mid-March. In fact, in 2015, the CRC held its first meeting on February 6 and confirmed the candidate on February 23 of the same month.

Once the CRC is activated, a long list of candidates is selected first. Typically, Hana Financial's CRC announces a long list of about 20 candidates. After several rounds of interviews, the final shortlist is announced. In 2018, when Chairman Kim was appointed, it took 11 days from the confirmation of the long list to the announcement of the short list, and 6 days to finalize the candidate.

The most likely candidate for chairman was Vice Chairman Ham Young-joo of Hana Financial Group. Vice Chairman Ham, a former CEO of the integrated KEB Hana Bank, is recognized for leading the merger of Hana Bank and Korea Exchange Bank during his tenure. However, legal risks remain a variable. Vice Chairman Ham is currently undergoing trials related to allegations of recruitment irregularities and the Derivative Linked Fund (DLF) scandal.

Other candidates who were also considered include Vice Chairman Lee Jin-guk, who is also CEO of Hana Financial Investment, and Hana Bank President Ji Sung-kyu, both facing obstacles due to investigations into stock insider trading allegations and upcoming disciplinary hearings related to the Lime and other private equity fund scandals.

"Resolving Legal Risks of Candidates and Overcoming COVID-19"... Momentum Builds for Reappointment

Because of this, a scenario is gaining traction where Chairman Kim receives reappointment and serves as chairman for the next year, during which the leading candidates resolve their legal risks and the COVID-19 situation enters a stabilization phase. According to Hana Financial’s ‘Governance Best Practices,’ there is no limit on the number of reappointments, only an age limit of ‘up to 70 years old.’ Chairman Kim is 69 this year, allowing him to extend his term by one more year. Chairman Kim has consistently expressed his intention not to seek reappointment. Although the short one-year term has been seen as a weakness, the increasing internal and external uncertainties have instead highlighted the ‘one-year term’ as a strength.

Hana Financial’s strong performance also increases the likelihood of Chairman Kim’s reappointment. Despite the adverse conditions caused by COVID-19 last year, Hana Financial posted a net profit of 2.6372 trillion KRW, a 10.3% increase compared to 2019, driven by growth in non-bank sectors and diversification of the group’s business portfolio. This is the highest performance since the holding company’s establishment in 2005 and marks four consecutive years of net profits exceeding 2 trillion KRW since 2017.

The remaining variable is the negative perception from financial authorities and public opinion regarding a long-term management system. Previously, during Chairman Kim’s third term reappointment in 2018, there was friction with the Financial Supervisory Service (FSS). At that time, the FSS pointed out that it was unfair for the incumbent chairman to participate in the CRC and requested a postponement of the next chairman candidate selection schedule, but the CRC proceeded as planned and ultimately selected Chairman Kim as the final candidate.

A financial industry official said, "Even if Chairman Kim succeeds in his reappointment, his term will end after a one-year extension. Although financial authorities are concerned about a long-term management system, they are unlikely to strongly oppose Chairman Kim because his term is not long."