The Democratic Party and financial authorities are considering a plan to require special resolutions at shareholder meetings for the reappointment of financial holding chairmen, rather than outright banning third terms by law. A bill has also been proposed in the National Assembly to apply special resolutions from the first reappointment onward. However, based on past voting results, the introduction of special resolutions is unlikely to change the outcomes of reappointments significantly.
According to political and financial sources on August 27, the Democratic Party and financial authorities are reviewing amendments to the governance law for financial companies that would strengthen voting requirements at shareholder meetings instead of directly limiting third terms for chairmen. This approach is seen as a response to potential constitutional issues and concerns over infringing on management autonomy if CEO terms are uniformly restricted by law.
A governance law amendment proposed by Democratic Party lawmaker Kim Hyun-jung goes further by requiring special resolutions for every reappointment of a financial holding representative director, not just for third terms.
Currently, the general resolution for appointing inside directors requires a majority of attending shares and at least one-fourth of the total issued shares to vote in favor. In contrast, a special resolution requires approval from at least two-thirds of attending shares and more than one-third of the total issued shares. This structure necessitates a certain level of support from all shareholders, not just those present at the meeting.
However, applying past voting results raises questions about the effectiveness of this measure. Recently reappointed chairmen, including Ham Young-joo of Hana Financial, Jin Ok-dong of Shinhan Financial, and Im Jong-ryong of Woori Financial, received support rates of 81.2%, 88.0%, and 99.3%, respectively, based on attending shares. Their approval rates compared to total issued shares ranged from approximately 68.5% to 78.8%, well above the one-third threshold required for special resolutions.
In cases of third-term reappointments, support rates were even higher. Former chairmen Kim Jung-tae of Hana Financial, Yoon Jong-kyu of KB Financial, and Kim Ki-hong of JB Financial received attending share support rates between 84.6% and 99.72%. Their approval rates compared to total issued shares also reached about 66.7% to 84.4%. Thus, even if the two criteria for special resolutions were applied, they would have successfully secured their third terms.
Given strong performance and increased shareholder returns, major shareholders such as the National Pension Service and foreign investors are unlikely to see special resolutions as a significant barrier for chairmen. This suggests that merely raising voting requirements has limitations in preventing long-term reappointments.
However, it could serve as a mechanism to filter out controversial candidates. For instance, former Shinhan Financial chairman Cho Yong-byeong faced legal risks related to hiring irregularities and opposition from proxy advisory firms during his first reappointment in 2020, resulting in a support rate of only 56.43%. Had a special resolution been in place, his reappointment proposal would likely have been rejected.
Ultimately, special resolutions appear to function more as a tool for filtering out controversial candidates rather than a means to prevent long-term reappointments. If the special resolution criteria under commercial law are applied as they are, the outcomes of past significant reappointments and third terms would remain unchanged. The key discussion moving forward will be whether the government and ruling party will impose higher separate requirements for third terms or apply special resolutions from the first reappointment onward.
* This article has been translated by AI.
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