New gov`t, same mistake?

Shin Jae-yoon, the nominee to head the Financial Services Commission, said in his confirmation hearing at the National Assembly Monday, “If I take office, I`ll propose replacing the heads of key state-run financial companies, if necessary, based on their consistency with the new administration’s philosophy and expertise.” He said the targets will be public financial companies, corporations whose heads are appointed by the commission, and financial companies in which the government is the largest shareholder. Shin is apparently aiming at the "four heavenly kings" of the Korean financial sector.

The industry is eyeing KDB Holdings Chairman Kang Man-soo, Woori Financial Holdings Chairman Lee Pal-seung and KB Holding Chairman Euh Yoon-dae. Expertise is understandably a criterion for replacing a CEO as Shin mentioned, but consistency with the administration’s philosophy is ambiguous enough to likely fuel controversy. The chairmen of financial holding companies hardly lack expertise given their experience in the field in academia, the government or financial sector, yet could have gotten their jobs because of their ties to former President Lee Myung-bak. The heavenly kings were unusually often mentioned in finance. As they were close to the president, financial authorities could not touch them.

The administration’s philosophy lacks persuasiveness for selecting public CEO and can interpreted differently by people. A more honest approach is ask them to step down since they enjoyed being the cream of the crop. If they are replaced because of a difference in philosophy, they would probably resist. Financial companies endure a bunch of fuss whenever a new president takes office, reflecting the underdeveloped status of the Korean financial industry. Lee Hun-jai and his members used to control the financial sector given his influence under the Kim Dae-jung and Roh Moo-hyun administrations. Under the previous Lee administration, the four heavenly kings controlled financial companies.

Replacing the heads of state-run financial companies would be easy if the administration is determined to do so, just as it did for the chairman of the Financial Services Commission, who has a guaranteed term of office. The CEOs of state-run financial companies have no guaranteed term under law, so they cannot refuse to leave if forced out. The positions, however, should not be filled with those who helped a president get elected.

Sogang University professor Choi Woon-yeol said, “Instead of valuing the administration’s philosophy, we need to select experts with the philosophy and vision to develop our financial industry," adding, “If political logic is valued more than economic logic, a vicious feedback loop will continue every time a new president takes office.” Replacing the former president’s confidants with those who contributed to the election of President Park is a top-down appointment disguised in the name of the administration’s philosophy, just like previous administrations did.