|Shinhan Financial Group Chairman Cho Yong-byoung speaks during a general shareholders' meeting at the group headquarters in Seoul in this March file photo. / Courtesy of Shinhan Financial Group|
By Park Jae-hyuk
Shinhan Financial Group's strong ties with ethnic Koreans living in Japan have come under the spotlight again, since one of its Korean Japanese non-executive directors acquired a large stake in the financial group recently.
According to a regulatory filing by Shinhan, Thursday, CYS CEO Choi Kyong-rok saw his stake in the financial firm increase to 0.27 percent ― roughly worth 40 billion won ($33 million) ― from 0.19 percent, July 16, after he inherited shares from his father, Choi Young-seok, the former CYS CEO who died in October last year. The late Choi was a non-executive director of the financial group and its banking unit.
Given that the Commercial Law prohibits non-executive directors from holding more than a 1 percent stake in the company. Choi is considered to have a significant stake. Furthermore, it is unusual for a son to take over his father's position as a non-executive director, according to industry officials.
Choi took the position in 2018, when Shinhan recommended him for his expertise and knowledge in digitization. He had also served as a non-executive director of Shinhan Life Insurance from 2010 to 2015.
Industry officials forecast Korean Japanese will continue to exercise their influence over Shinhan, handing over their shares to their descendants as the Choi family did.
In addition to Choi, three more are serving as non-executive directors at Shinhan ― Fedora CEO Jin Hyun-duk, Taisei Group Chairman Park An-soon and Primer Korea CEO Yuki Hirakawa.
Shinhan has offered four non-executive seats among 10 to Korean Japanese over the past decade, although the company denied any impropriety.
When it was criticized for its shareholder structure during the "Boycott Japan" movement last year, following the Korea-Japan trade dispute, the group emphasized it is a Korean company as the successor to Hanseong Bank, the nation's first commercial bank established in 1897.
However, Shinhan Bank was established in 1982 by Korean Japanese Lee Hee-gun, based on investments from ethnic Korean shareholders living in Japan. They have invested 25 billion won since the bank's launch. The reason Shinhan calls itself as the successor to Hanseong Bank is because of its merger with Chohung Bank in 2006. Hanseong changed its name to Chohung in 1943.
Sources said Shinhan still seeks approval from its Korean Japanese shareholders when making important decisions. Its management has frequently visited Japan to meet elderly Korean Japanese shareholders, who are known to collectively have a 17 percent stake.
The governance has caused a series of controversies, as Korean Japanese have held many non-executive seats, relative to their stake.
In September 2017, the Financial Supervisory Service sent a warning to Shinhan, pointing out its Korean Japanese directors were unsuitable for their positions. The Center for Good Corporate Governance also disagreed with the appointment of Choi as a non-executive director in 2018, raising a suspicion about his relationship with Shinhan management.