South Korea’s financial groups are moving to raise the salaries of their top executives despite their affiliates’ weak profit performances, industry data showed Thursday.
Shinhan Financial Group Co., the country’s largest banking group by assets, raised the ceiling of its board of directors’ annual salary to 4.5 billion won ($4.1 million) from 3 billion won at its shareholders meeting on Wednesday, according to the company’s regulatory filings.
It slashed the maximum salary amount of its top-ranking officials from 6 billion won to 3 billion won last year after strong public outrage after its chairman, Han Dong-woo, was paid as much as 2.82 billion won in 2013.
No. 3 Hana Financial Group Inc. is following suit. An agenda item for a shareholders meeting slated for Friday would raise the number of its directors’ performance shares from 50,000 to 70,000, which would result in larger bonuses for its executives.
Performance shares refer to a stock compensation system in which shares of company stock are given to managers or members of the board of directors if certain corporate performance targets, such as earnings, are met.
Hana Financial’s move came just a year after it had lowered the ceiling to 50,000 shares after critics pointed out that the salaries of the chief executives of financial institutions were out of line with their performance of their companies.
Hana Financial Chairman Kim Jung-tai had received 2.64 billion won in salary in 2013, including an additional 39,580 performance shares worth 1.74 billion won. He returned 30 percent of his salary after fierce criticism and revised down the number of his performance shares.
But the group is trying to have the figure return to the original level this year, as the financial sector seems to be outside of social monitoring amid a deepening economic slump.
“We are preparing for an imminent merger between Hana Bank and the Foreign Exchange Bank,” said a Hana Financial official, requesting anonymity.
Hana Financial is pushing to integrate its two commercial bank affiliates, but its attempt has been stalled due to strong protests by the KEB’s labor union.
Market watchers said that financial companies are only focusing on lining the pockets of their managers although the banking industry has failed to improve its profitability in recent years.
Local banks posted a combined 6.2 trillion won in net profit in 2014, compared with 15 trillion won in 2007, while insurance firms saw their profit jump to 5.6 trillion won from 3.8 trillion won over the cited period.
The South Korean financial groups are highly dependent on their flagship banks in terms of net income and assets. For example, Shinhan Bank is responsible for 64 percent of its holding company’s net profit, while Hana Bank accounts for 91 percent of the group’s total income.
Instead, they laid off hundreds of workers in a bid to reduce labor costs, with Shinhan Bank having 310 employees retire earlier this year.
“Raising the salary ceiling is a wage hike,” said Jeong Seon-seob from Chaebul.com, a Seoul-based market research firm.
“They give a salary increase to managers despite a drop in profit and downsizing efforts.” (Yonhap)
