Financial holding company chiefs barred from third terms under incoming governance reform

Financial regulators have finalized a sweeping governance reform plan that would cap the tenure of financial holding company CEOs at one reappointment, with an official announcement expected soon — more than seven months after President Lee Jae Myung sharply criticized what he called a "corrupt inner circle" wielding power over the financial sector. Once the legislation takes effect, the industry's governance practices are expected to undergo significant change.

The Financial Services Commission has completed its final plan to modernize corporate governance at financial firms and is coordinating the timing of its announcement, according to financial industry sources Tuesday.

The FSC has set a target of making the official announcement this month. Regulators had strongly considered unveiling the plan through a meeting with the heads of the eight major financial holding companies, but an alternative approach — announcing the plan separately and then sharing it with each holding company — has also been raised. Wednesday had been floated as a possible announcement date, but regulators are weighing a delay until next week, partly due to the Financial Supervisory Service chief's overseas travel schedule.

The reform package is the product of months of deliberation by a task force jointly formed by the FSC and the Financial Supervisory Service, following President Lee's remarks at the FSC's work briefing in December, when he said it was unacceptable to allow "a corrupt inner circle to form and let a small number of people exercise power." The task force has since examined the issue from multiple angles.

The centerpiece of the plan is a statutory cap on the total tenure of financial holding company CEOs. Under current law, no such limit exists; individual holding companies have only their own internal rules, such as a maximum age of 70. Under the new framework, regulators plan to enshrine in the Act on Corporate Governance of Financial Companies a rule allowing only one reappointment — meaning a chair could serve an initial three-year term plus one three-year renewal, for a maximum of six years. The measure aims to fundamentally block the entrenched practice of self-engineered reappointments and the co-opting of outside directors to extend one's grip on power.

Beyond the tenure cap, the reform plan includes several other measures to improve governance transparency. Chief among them is a proposal to raise the threshold required for board and shareholder approval when a CEO seeks reappointment. The plan is also expected to place significant emphasis on strengthening the role of institutional investors such as the national pension fund, and on improving the rationality of executive compensation structures.

The legislation is likely to pass later than the late-October timeline regulators had originally envisioned, given the time needed for National Assembly deliberations. However, the guidelines are expected to apply to financial sector governance immediately, even before any formal legal amendment takes effect.

KB Financial, which has already begun its CEO succession process to select the next chair, is expected to be the first institution subject to the new guidelines. Yang Jong-hee, the current KB Financial chair, is seeking his first reappointment, so the six-year maximum tenure limit poses no eligibility issue for him. However, as regulators push to raise the approval threshold for CEO reappointments, the bar for passing a special shareholder resolution and similar votes is expected to become considerably higher.

Chairs at other financial holding companies who have already secured reappointments and are currently serving second terms face a harder road. Ham Young-joo of Hana Financial Group, Jin Ok-dong of Shinhan Financial and Lim Jong-ryong of Woori Financial Group — each of whom won reappointment in 2024 or 2025 — would be completely barred from seeking an additional term once the amended law takes effect.

"It will take some time to complete the legislation, but given that regulators have made their reform intentions unmistakably clear, major holding companies will likely move proactively to restructure their boards and CEO succession programs," a financial industry official said.