Labor Director System in Financial Sector Fails to Gain Momentum, Union-Recommended Director System
[Asia Economy Reporter Park Sun-mi] Amid growing concerns over President Moon Jae-in's 'lame duck' (power loss at the end of a term) following the April 7 by-elections, there are speculations that the introduction of labor directors in financial companies might 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 institution to introduce the system, has also made no progress.
According to the financial sector on the 8th, since receiving multiple external director candidate pools from the labor union in February, IBK President Yoon Jong-won has not recommended any external directors, including union-recommended directors, to the Financial Services Commission. Some say that President Yoon has agreed with the union to recommend one union-recommended external director and plans to submit the recommendation to the Financial Services Commission around mid-month, but IBK stated, "Nothing has been decided." The union is also uncertain whether President Yoon has recommended any external director candidates to the Financial Services Commission and is monitoring the situation.
At IBK, the terms of two external directors expired on February 12 and March 25. Due to the issue of introducing the union-recommended director system, the appointment of successors has been delayed, and external director Lee Seung-jae is staying in his position after his term expired to comply with the regulation requiring 'at least three external directors.' According to the plan, President Yoon should have completed the recommendation process for external director candidates last month, but the delay has caused a setback. Even if President Yoon recommends multiple candidates including the union's nominee, it remains uncertain how the Financial Services Commission, which holds the final appointment authority, will decide.
In a written press conference held in February, President Yoon stated regarding the introduction of the union-recommended director system, "We are gathering opinions through various channels, including the union, to recommend experts with excellent capabilities who can contribute to the bank's development," but also noted, "The worker-recommended director system or labor director system is an issue with both expectations and concerns, and its implementation requires amendments to related laws."
Repeated Failures of Union-Recommended Director Systems in the Financial Sector
Only the Worker Board Observer System is at a Nascent Stage
Initially, IBK was expected to be the 'first' among financial public enterprises and policy banks to introduce the union-recommended director system, but slow progress has led to speculation that the system's introduction in the financial sector might fail again this time. The Export-Import Bank of Korea, which has one external director term expiring next month, is searching for candidates recommended by the union, but after several failures in introducing the union-recommended director system, attention is focused on whether IBK will produce the first union-recommended director.
The introduction of the labor director system, which guarantees labor union participation in the board of directors, was 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 get off the ground in the financial sector. Only the worker board observer system, which has a lower barrier, is currently at a nascent stage mainly in financial public enterprises.
The worker board observer system guarantees that worker representatives can observe board meetings. Although they do not have voting rights, worker representatives can view agenda items and related materials and have the right to speak.
Currently, the Korea Deposit Insurance Corporation is in discussions between labor and management aiming to introduce the worker board observer system within the first half of the year. If implemented at KDIC, it will be the third case in the financial sector following the Export-Import 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."
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