'Money Feast' in Focus... Financial Holding CEOs Worried About Annual Salaries

[Asia Economy Reporters Bu Aeri and Yoo Jehoon] President Yoon Suk-yeol's criticism of the financial sector's 'money feast' has deepened the concerns of the CEOs of financial holding companies at the forefront. Since last year’s record-breaking performance, the annual salaries of holding company chairpersons, which are expected to be disclosed as early as next month, are likely to surge significantly. As social pressure related to inclusive finance in the financial sector intensifies, their sense of burden is also growing.

According to the Financial Supervisory Service’s electronic disclosure system on the 22nd, the net profit of the four major financial holding companies (KB Kookmin, Shinhan, Hana, and Woori) last year was 15.8506 trillion KRW. This figure represents an 8.99% (1.3077 trillion KRW) increase compared to the previous year (14.5428 trillion KRW), which was already the largest ever recorded.

Analyzing the business reports of each company over the past five years (2017?2021), the CEOs of the four major financial holding companies received compensation ranging from 600 million KRW to 2 billion KRW. For example, KB Financial Group Chairman Yoon Jong-kyu received 2.657 billion KRW in 2020 and 1.726 billion KRW in 2021. During the same period, Shinhan Financial Group Chairman Cho Yong-byeong received 1.251 billion KRW and 839 million KRW (with bonuses yet to be confirmed), and Woori Financial Group Chairman Sohn Tae-seung received 1.1 billion KRW and 1.112 billion KRW. Former Hana Financial Group Chairman Kim Jung-tae received between 1.242 billion KRW and 2.635 billion KRW annually over five years.

Based on the first half of last year, current Hana Financial Group Chairman Ham Young-joo received a total of 1.079 billion KRW, Chairman Sohn received 774 million KRW, and Chairman Yoon received 650 million KRW. Retired Chairman Kim received 4.464 billion KRW, including retirement pay and special merit bonuses.

Among the components that make up their total compensation (salary, bonuses, and other income), salaries do not differ significantly. However, total compensation varies depending on the bonus amount, which is performance-based. Typically, bonuses for financial holding company CEOs are determined through a Performance Share (PS) system linked to long-term performance evaluation. This system evaluates performance over a three-year term and pays out in stock-related compensation. Given last year’s massive net profit, a substantial bonus amount is likely to be set.

Of course, the total compensation of financial holding company CEOs is not necessarily higher than that of CEOs in non-financial companies. For instance, Samsung Electronics, which posted a net profit of 30 trillion KRW in 2021, paid its three CEOs between 8.644 billion KRW and 11.838 billion KRW each.

However, unlike general companies, the banking sector has effectively formed an ‘oligopoly,’ making simple comparisons difficult. Financial Supervisory Service Governor Lee Bok-hyun also mentioned at a press conference on the 6th, "There is no disagreement about the private enterprise nature of banks," but added, "In the case of banks, there is a structurally privileged position granted due to their oligopolistic form."

Within the industry, there is cautious speculation that, given precedents where some CEOs voluntarily returned part of their salaries to fund social contribution projects, a similar trend might continue amid the current triple high (high inflation, high interest rates, high exchange rates) crisis.

In 2015, amid rising youth unemployment and other issues, CEOs of major financial companies such as KB, Shinhan, and Hana Financial jointly announced they would return 30% of their salaries to create jobs. Even earlier, following the 2008 global financial crisis, KB Financial Group executives returned 10?30% of their salaries, and Shinhan Financial Group executives also returned 10?30% of their salaries.

A financial holding company official said, "Internally, there is a view that one-off measures or fragmented social contributions alone cannot change the atmosphere, so there is much concern. Also, these issues cannot be resolved by individual banks acting alone but require joint responses," conveying the current sentiment.