[Reporter’s Notebook] "Eradicating the Shadow Culture" at Woori Financial Group, Implementation Remains

"As an integrated bank established through the merger of several banks, and with a long history of not being privatized, it is true that the bank has a factional and passive culture. I believe that Woori Bank cannot stand firmly without eliminating this shadow culture."

Shadow culture. This is the diagnosis given by Lim Jong-ryong, Chairman of Woori Financial Group, on the organizational culture of Woori Bank that surfaced following the scandal involving illicit loans by relatives of former Chairman Sohn Tae-seung on the 10th. Lim, the first CEO among the five major financial holding companies (KB, Shinhan, Hana, Woori, NH Nonghyup) to appear at the National Assembly audit, apologized to the public that day and bowed repeatedly, saying, "We will strive to strengthen internal controls and establish a proper corporate culture to prevent such incidents from recurring."

The organizational culture of Woori Bank, where consecutive embezzlement and illicit loan scandals involving hundreds of millions of won have occurred, has not been entrenched overnight. Starting from the merger of Commercial Bank and Hanil Bank, and absorbing Peace Bank, the organization has undergone several privatization attempts, accumulating problems over more than 20 years. Chairman Lim’s description of a shadow culture that relies on factions and connections rather than performance seems timely.

At the National Assembly audit, Lim also revealed plans for organizational reform. Since the current crisis originated from a 'king-like chairman,' he decided to adjust the chairman’s authority and role and maximize the autonomy of affiliates. Additionally, an internal control committee composed of outside directors will be established, and the authority of the board of directors will be strengthened by placing an external figure at the head of the Ethics Management Office under the board. This diagnosis and reform plan align with the analysis and solutions presented by Asia Economy in its September 2-5 special series titled 'Cornered Lim Jong-ryong Administration,' which examined Woori Bank’s organizational culture.

However, as confirmed after the 70 billion won embezzlement incident by an employee of Woori Bank’s Corporate Improvement Department in 2022, there is a difference between 'plans' and 'implementation' of reforms. At that time, several institutional improvement proposals were made, but ultimately, as revealed in the Sohn former chairman scandal, the reform plans were not practically implemented. Considering that the illicit loan scandal occurred around the same time among the top echelons of the group, it might be more accurate to say that there was no will to change or to implement reform plans.

Even under the current Lim administration, which must carry out reforms, various problems have been raised. Excessive concentration of authority in the holding company and chairman, and the rise of specific academic and personal networks have acted as obstacles to improving Woori Bank’s organizational culture. This is why the Financial Supervisory Service’s criticism that "the same practices are being repeated under the new chairman-president system" carries weight.

There are already many skeptical views that "since the management team has only half of its term left, limitations remain." If the essence of reform is implementation, then the essence of implementation is the 'will' of Chairman Lim and others. To prevent a repeat of the past when reform plans became useless, a 'change' starting with himself letting go is necessary. If he shows such a will for reform, progress in practical efforts to change the organizational culture can also be expected.