"Can't Even Speak"... Annual Salary of 80 Million Won, Worked 1.64 Hours a Day and Took It Away [Yesman Outside Director]②

Despite Criticism of Being "Rubber Stamps,"
Outside Directors at Four Major Financial Groups
Received Up to 100 Million KRW in Annual Compensation
with No Dissenting Votes

Outside directors of the four major financial holding companies (KB, Shinhan, Hana, Woori) were found to have received compensation of up to 100 million KRW over the past year. Despite being criticized as 'rubber stamps' (people who raise their hands as instructed from above without their own opinions) for not casting a single 'no' vote on any agenda item presented last year, they have drawn criticism for receiving high salaries reaching 100 million KRW. Although the financial sector is attempting reform through the replacement of outside directors, the controversy over rubber-stamping is expected to continue due to only minor changes.

According to the '2024 Annual Report on Governance and Compensation Systems' of the four major financial holding companies on the 6th, 32 outside directors (7 from KB, 9 from Shinhan, 9 from Hana, and 7 from Woori) worked an average of 405 hours last year and received an average annual salary of 80.43 million KRW. The boards of the four financial holding companies received high salaries without casting a single dissenting vote on any of the 161 resolutions discussed throughout the year.

In particular, criticism has arisen that even decisions on board composition and compensation limits were passed with the outside directors' approval, undermining legitimacy and trust. Furthermore, they unanimously approved all resolutions of the Risk Management Committee, which is responsible for timely recognizing and controlling risks occurring across the financial groups. There were zero rejected or deferred agenda items.

The compensation received by outside directors over the year ranged from a minimum of 55.29 million KRW to a maximum of 102.66 million KRW. The annual working hours of financial holding company outside directors averaged 405 hours, indicating a relatively low work intensity. Excluding holidays and days off, this amounts to only about 1.64 hours of work per day on average.

By financial holding company, KB Financial Group's outside directors worked an average of 428 hours annually and received an average compensation of 92.32 million KRW. The lowest was 66.95 million KRW and the highest was 102.66 million KRW, with Kwon Seon-ju, the board chairperson, receiving the highest compensation. The average working hours of outside directors included meeting participation time, pre-meeting briefing time, and agenda review time.

Next, Woori Financial Group's outside directors worked an average of 406 hours annually and received an average of 80.58 million KRW (excluding outside director Ji Seong-bae, who did not receive compensation). The compensation ranged from 60.40 million KRW to 94.50 million KRW, with board chairperson Jeong Chan-hyung receiving 94.50 million KRW. Shinhan Financial Group's outside directors worked an average of 436 hours and received an average of 78.04 million KRW. Their annual compensation ranged from 65.40 million KRW to 92.10 million KRW, with board chairperson Yoon Jae-won receiving the highest pay. Lastly, Hana Financial Group's outside directors worked an average of 347 hours annually and received an average of 70.78 million KRW. Their compensation ranged from 55.29 million KRW to 89.18 million KRW, with board chairperson Lee Jeong-won receiving the highest salary.

The average annual salary of outside directors has been rising every year. According to the 'Analysis of Outside Director Salary Levels' report released last year by the Korea ESG Evaluation Institute, the average annual salary of outside directors at the top 100 listed companies that submitted their 2023 business reports was 80.52 million KRW. This represents a 1.7% increase compared to the 79.21 million KRW average in 2022. The growth rate has slowed compared to the 6.4% increase in 2022.

This year, financial holding companies have attempted reform through the replacement of outside directors, but the rubber-stamp controversy is expected to persist. Except for Woori Financial, which replaced 4 out of 5 outside directors whose terms expired out of 7, all others made only minor replacements. The number of outside directors whose terms expired and newly appointed outside directors by financial holding company are as follows: ▲ KB Financial (6 expired, 2 newly appointed) ▲ Shinhan Financial (7 expired, 2 newly appointed) ▲ Hana Financial (5 expired, 1 newly appointed).

Professor Seo Ji-yong of the Department of Business Administration at Sangmyung University said, "The reason why controversies over outside directors in the financial sector persist is that outside directors are often selected through recommendations from related institutions rather than transparent public recruitment processes, making it difficult to maintain independence in decision-making." He added, "Also, when lacking expertise, they tend to follow the majority opinion rather than voicing their own." Professor Seo further explained, "These two issues must be resolved to be free from the 'rubber stamp' controversy."