South Korea's financial authorities will tighten shareholder meeting voting requirements to limit long-term reappointments of bank financial holding company chairmen. They are also pushing a plan to make CEO nomination committees consist only of independent directors and to limit incumbent CEOs' involvement in succession procedures.

The Financial Services Commission held a party-government consultation with the Democratic Party on Nov. 12 and announced the "measures to improve financial company governance". The steps reflect the Financial Supervisory Service's special inspections of 8 bank holding companies and discussions by the governance advancement task force.

Under the measures, a bank holding company CEO seeking a first reappointment must win approval at a shareholder meeting from at least two-thirds of voting rights represented at the meeting and at least one-third of total outstanding shares.

For a second or subsequent reappointment, the thresholds rise to at least three-quarters and at least one-half, respectively. Under current rules, an appointment can be made with a majority of voting rights represented at the meeting and approval from at least one-quarter of total outstanding shares.

Executive Nomination Committees that recommend CEO candidates will be made up entirely of independent directors. The FSC plans to require approval from at least two-thirds of all committee members to recommend a candidate and at least three-quarters to recommend a reappointment. It will also ban acts in which an incumbent CEO improperly intervenes in the succession process and require disclosure if a candidate contacts a committee member.

The FSC will also overhaul compensation systems for financial firm executives. Listed financial firms above a certain size will be required to explain individual executive pay plans at shareholder meetings, and disclosure of compensation for high earners will be tightened. The FSC also plans to introduce a system to claw back performance pay already paid if losses are caused to the company through intent or gross negligence.

The FSC plans to prepare by year-end an amendment to the Financial Company Governance Act reflecting the measures and to push revisions to related supervisory regulations and best practices.