Forced Legislation of Labor Director System... Increasing Interest in Financial Sector
KIAT and KODIT Four Members' Terms Expire Next Year
[Asia Economy Reporter Jin-ho Kim] Amid the presidential election climate, the introduction of the ‘union-recommended director system’ within the financial sector has resurfaced. As the ruling party pushes to pass a bill mandating the ‘labor director system’ within the year, interest is rising mainly among major financial public institutions. Following the Export-Import Bank’s lead in September, IBK Industrial Bank and the Korea Credit Guarantee Fund are being mentioned as the next candidates.
According to political and financial circles on the 9th, the Democratic Party of Korea plans to convene an extraordinary session of the National Assembly within this month to pass a bill introducing the labor director system in the public sector. This is interpreted as a follow-up to presidential candidate Lee Jae-myung’s recent promise to a Korean Confederation of Trade Unions official that he would achieve what the people want, even if it requires using the fast-track legislative procedure.
The amendment to the Public Institution Operation Committee Reform Act, proposed by Democratic Party lawmaker Woo Won-shik, mainly stipulates the introduction of the labor director system as a matter for committee deliberation and resolution.
As the political sphere actively pushes for the legalization of the labor director system, the financial sector expects the movement to appoint union-recommended directors in financial public institutions to gain more momentum. The introduction of the union-recommended director system has been a steadily raised issue in the financial sector over the past few years.
The union-recommended director system is a system where the labor union recommends outside directors. These directors can exercise speaking and voting rights on major management matters. Although it differs from the labor director system, where workers directly participate in the board of directors, both share the aspect of representing workers’ interests in the decision-making process.
Currently, the only financial institution where a union-recommended individual participates on the board is the Export-Import Bank. In September, the Ministry of Economy and Finance appointed Lee Jae-min, head of the Marine Finance Research Institute and a union-recommended candidate, as an outside director. It is reported that the ministry accepted the union’s proposal to increase the number of outside directors by one to enhance governance soundness.
The labor unions of financial public institutions such as IBK Industrial Bank and the Korea Credit Guarantee Fund are expected to accelerate the introduction of the union-recommended director system in line with the expiration of outside directors’ terms early next year. At IBK Industrial Bank, two of the four outside directors’ terms expire at the end of March next year. At the Korea Credit Guarantee Fund, two of seven outside directors’ terms end at the end of next month.
In particular, the IBK Industrial Bank union is reported to have a strong will. The union was promised the introduction of the union-recommended director system when President Yoon Jong-won took office. Although the union’s recommended candidate reached the final stage earlier this year, the appointment did not materialize, so the union is determined to see the system implemented by the end of March next year when the two outside directors’ terms expire.
The Korea Credit Guarantee Fund is hopeful as the political sphere is pushing for the legalization of the labor director system. Kim Jae-beom, chairman of the Korea Credit Guarantee Fund union, said, "Since the political sphere is promoting the introduction of the labor director system within the year, we are watching closely. If the bill passes, we will recommend outside director candidates according to the law."
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