Hana Financial Group revised its age-limit clause in a way favorable to the incumbent chairman one day before unveiling its pool of candidates for the next chairman. The episode has revived a governance issue: outside directors fail to act as a check in the selection of financial holding company chairmen. Of 6,100 board votes at financial holding companies, outside directors cast a dissenting vote only once.
Hana Financial Group changed the age-limit rule for chairman candidates just one day before disclosing its list of candidates. The revised rule works in favor of the current chairman. The timing of the change coincides with the disclosure schedule for the candidate pool, a gap of only one day. Looking at board voting records of financial holding companies over the same period, outside directors voiced opposition in only one of some 6,100 votes. This means that even when there were warning signs in the chairman selection process, the boards did not apply the brakes.
The first issue is the timing of the rule change. Candidate eligibility requirements should be fixed well before the candidate pool is formed to avoid suspicion that the change was made with a particular person in mind. At Hana Financial Group, the age criterion was adjusted right before the pool was disclosed, and since the result favored the incumbent chairman, the fairness of the process is in question. Regardless of the merits of the rule itself, the timing alone invites the assessment that it was a tailor-made revision to enable a term extension.
The second issue is the checking function of outside directors. Outside directors are a safeguard meant to oversee management and exercise independent judgment on the board. But the fact that only one of 6,100 votes was an opposing vote shows that the board has effectively operated as a channel that passes management's agenda as is. It is seen as a problem that no dissenting voice emerged even on an agenda item such as chairman eligibility requirements, which is directly tied to the interests of the chief executive himself.
The third issue is that this pattern is not limited to a particular financial holding company. BNK Financial Group's chairman selection process, which spans the Chuseok holiday period, is also being discussed. That is why calls are emerging across financial holding companies to rein in so-called tricks aimed at extending chairmen's terms. Beyond individual companies' rule changes, the independence of the entire board structure of financial holding companies is being put to the test.
Hana Financial Group's explanation of the specific background to the rule change and the board's deliberations cannot be confirmed from what has been disclosed so far. The grounds on which the outside directors approved the agenda item have not yet been revealed either.
The first checkpoint going forward is how Hana Financial Group narrows down the disclosed pool and picks the final candidate. How the board applies the revised age criterion in that process, and whether outside directors exercise independent judgment, are expected to determine the course of the governance controversy.