South Korea's Financial Services Commission (FSC) announced a governance reform plan to limit chief executive officer (CEO) influence over succession, strengthen board and shareholder oversight, and tighten executive remuneration controls. The package follows a Financial Supervisory Service inspection of eight bank holding companies that identified shortcomings in director selection, board scrutiny and succession procedures. Implementation would require changes to legislation, supervisory rules and governance best practices.
The independent director framework would extend to all financial companies, and CEO nomination committees would consist entirely of independent directors. Incumbent CEOs would be barred from attending committees recommending independent directors or audit committee members. Improper interference in succession would attract sanctions, while contacts with nomination committee members during succession would require disclosure. For bank holding companies, CEO nominations would require approval from at least two thirds of all committee members for initial appointments and three quarters for reappointments. A first reappointment would require shareholder support representing at least two thirds of voting rights present and one third of all issued shares. Second and subsequent reappointments would require at least three quarters of voting rights present and half of all issued shares. Succession procedures would begin earlier, supported by clearer evaluation criteria and fuller disclosure of assessments.
Shareholders in listed financial companies would gain a formal channel to recommend independent directors. Planned legal interpretations would clarify when institutional investors can make nominations at a company's request without being treated as seeking to influence management control. On remuneration, larger listed financial companies would have to explain and report individual executive pay plans at shareholder meetings, alongside expanded disclosure of remuneration for highly paid executives and employees. Minimum performance pay deferral requirements would increase. Clawbacks would apply where intentional misconduct or gross negligence causes company losses, or where financial statements used to calculate performance pay are restated. The FSC plans to prepare amendments to the Act on Corporate Governance of Financial Companies and related rules and best practices by the end of 2026, alongside revisions to the stewardship code.