Lame Duck Predicted... Moon's Pledge for Worker Management Participation in Finance Sector 'Stalled'

Labor Director System in Financial Sector Fails to Accelerate, Introduction of Union-Recommended Director System

[Asia Economy Reporter Park Sun-mi] Amid growing concerns over President Moon Jae-in's 'lame duck' (power loss in the final term) following the April 7 by-elections, there are speculations that the introduction of the labor director system in financial companies may be delayed again this year. This is because it has already failed at KB Financial Group, and IBK Industrial Bank of Korea (IBK), which was expected to be the first financial company to introduce it, has also made no progress.

According to the financial sector on the 8th, since receiving multiple outside director candidate pools from the labor union in February, Yoon Jong-won, president of IBK, has not recommended outside directors, including union-recommended directors, to the Financial Services Commission (FSC). Some say that President Yoon has agreed with the union to recommend one union-recommended outside director and plans to submit the recommendation to the FSC around mid-month, but IBK stated, "Nothing has been decided." The union is also uncertain whether President Yoon has recommended any outside director candidates to the FSC and is monitoring the situation.

At IBK, the terms of two outside directors expired on February 12 and March 25. Due to delays in appointing successors amid the issue of introducing the union-recommended director system, outside director Lee Seung-jae has remained in his position after his term expired to comply with the regulation requiring 'at least three outside directors.' According to the plan, President Yoon should have completed the recommendation process for outside director candidates last month, but the delay has caused a setback. Even if President Yoon recommends multiple candidates including union-recommended ones, it remains uncertain how the FSC, which holds the final appointment authority, will decide.

Repeated Failures of Union-Recommended Director System in Financial Sector
Only the Worker Board Observer System is at the Early Stage

Initially, IBK was expected to be the 'first' financial public enterprise or policy bank to introduce the union-recommended director system, but slow progress has led to speculation that the system's introduction in the financial sector may fail again this time. The Export-Import Bank of Korea, which has an outside director term expiring next month, is searching for suitable candidates recommended by the union, but having experienced several failures in introducing the union-recommended director system, it is closely watching whether the first union-recommended director will emerge at IBK.

The introduction of the labor director system, which guarantees labor union participation on the board, is one of President Moon's key election pledges. However, even the union-recommended director system, considered a preliminary step before the labor director system, has yet to take off in the financial sector. Only the worker board observer system, which has a lower barrier, is at a nascent stage mainly in financial public enterprises.

Currently, the Korea Deposit Insurance Corporation (KDIC) is in discussions between labor and management aiming to introduce the worker board observer system within the first half of the year. If KDIC introduces this system, it will be the third case in the financial sector following the Korea Development Bank in 2001 and the Korea Housing Finance Corporation in February this year. A financial sector official said, "Last year, various attempts were made by labor unions in financial public enterprises and private financial companies to guarantee workers' participation in management, but they ultimately failed," adding, "If the union-recommended director system does not take root in financial public enterprises and policy banks, it will be even more difficult to spread to private financial companies."