[Diary Point = Reporter Um Ju-yong] To win a first reappointment, a bank holding company chair will need support from at least two-thirds of voting rights represented at the shareholders’ meeting and at least one-third of all issued shares. Starting with a second reappointment—the CEO’s third term—the thresholds rise to three-quarters of votes represented and half of all issued shares.
South Korea’s Financial Services Commission and the Democratic Party of Korea announced proposals to improve corporate governance at financial companies on the 12th. Current rules generally require majority approval by the executive candidate recommendation committee and shareholders’ meeting for CEO appointments and reappointments. Under the proposed changes, the required support from both shareholders and the committee would rise with each reappointment.
Nomination committee would also need 75% approval for reappointments
For an initial appointment, a CEO candidate would need the support of at least two-thirds of the full nomination committee. A candidate seeking reappointment would need at least three-quarters support, starting with the first reappointment. The committee responsible for recommending candidates would be made up entirely of independent directors. The sitting CEO would also be barred from attending committee meetings that recommend independent directors or audit committee members.
At the shareholders’ meeting, the threshold would rise in stages from the current requirement—more than half of the voting rights represented and at least one-quarter of all issued shares. A first reappointment would require two-thirds of votes represented and one-third of all issued shares. From the second reappointment onward, the candidate would need three-quarters of votes represented and at least half of all issued shares. In other words, a candidate must meet both the approval rate among shareholders attending and the threshold based on all issued shares.
The changes would give shareholders greater influence when voting for or against a reappointment. They would also give institutional investors clearer benchmarks for assessing CEO succession and board independence. The FSC plans to include nonfinancial factors, such as financial misconduct and regulatory sanctions, in CEO evaluations, strengthen disclosure of evaluation results, and begin succession planning earlier to allow more time for vetting candidates.
The announcement outlines proposed reforms. The FSC said it would prepare amendments to laws and regulations on corporate governance, along with revisions to its best-practice guidelines, by the end of the year. The implementation date and the companies covered will be clarified through the legislative process and subsequent steps.