[News Focus] KEB Hana Bank in tight spot over 3rd term of CEO Ham Young-joo

KEB Hana Bank, one of South Korea’s major commercial banks, is at odds with local financial regulators over the reappointment of its incumbent CEO and President Ham Young-joo as chief for the third time.

The Financial Supervisory Service has expressed concerns that Ham, currently indicted and under trial here for alleged involvement in a hiring scandal at the bank, may be unfit to lead. Hana, meanwhile, is said to be prioritizing Ham’s “proven managerial talents and profit milestones.”

On Thursday, Hana Financial Group, the banking group centered on KEB Hana Bank, said it will be nominating Ham as a CEO candidate in an executive nomination meeting. Ham is widely expected to be formally voted in as chief during a shareholders meeting next month.

However, the FSS recently voiced concerns over Hana’s move, with FSS Gov. Yoon Suk-heon publicly stating earlier this week that Ham’s involvement in the ongoing trial regarding the bank’s hiring scandal constitutes a major “legal risk.”

The FSS added in a statement that its officials recently met with Hana Financial’s outside board members to discuss its CEO reappointment process. During the event, the financial watchdog expressed concerns that the “legal risk” Ham carries could hurt the bank’s managerial stability and credit standing.

The move, in turn, drew criticism that the financial authorities are meddling in corporate affairs. In response, the FSS said that the responsibility and decision making on KEB Hana Bank’s presidency appointment are wholly up to Hana Financial board members.

The FSS argued that its latest recommendation is a part of its regular auditing duties, which include warning companies of potential corporate governance risks.

Ham, who became CEO of KEB Hana Bank in September 2015, was indicted in June last year over allegations of business disruption and obstruction of the equal employment law. The related trials began in August, and are still ongoing.

Ham has been accused of pressuring the bank’s human resources department to hire the son of an acquaintance in 2015. The president also allegedly ordered that new employees be hired under a 4:1 male-female gender ratio in 2015 and 2016, which constitutes as discrimination.

The court is set to make a decision on the KEB Hana Bank case later this year. And if Ham is sentenced to a jail term, it could impact the bank’s management stability and credit standing, the FSS asserts.

Meanwhile, KEB Hana Bank retains its position that Ham is a fitting candidate for president, as he has successfully led the bank’s management and achieved high profits for the group.

In 2018, KEB Hana Bank posted a record profit of 2.93 trillion won ($2.62 billion), continuing its upward streak for two consecutive years. Buttressed by the bank’s performance, Hana Financial Group logged record-high net profit of 2.24 trillion won in 2018, up 10 percent from a year earlier.

This is not the first time that Hana Financial has clashed with the FSS over its top brass. Last year, the financial watchdog openly criticized Hana for nominating Chairman Kim Jeong-tae for a third term as the group’s chief.

But during this process, then-FSS Chairman Choe Heung-sik himself was accused of arranging recruitment favors during his former position as CEO at Hana Financial Group. He resigned from his post at the time as a result of the scandal, in an ironic turn-of-events.

On the other hand, Hana Financial ended up going through with its plans to reappoint Kim Jeong-tae as chairman for the third consecutive time, despite the FSS’ rejection.

By Sohn Ji-young (jys@heraldcorp.com)