Major financial holding companies are growing more tense ahead of regular annual general meetings this month. Financial authorities are strongly calling for governance overhauls, including improvements to chief executive officer reappointment procedures and stronger board independence. Proposals to reappoint chairmen, appoint outside directors and amend articles of association are set to come before shareholders.

In the financial sector, regular annual general meetings will be held in succession, starting with Woori Financial Group on March 23, followed by Hana Financial Group on March 24 and KB Financial Group, Shinhan Financial Group and BNK Financial Group on March 26.

The financial sector is focusing on the outcomes of the meetings, in conjunction with governance-advancement measures being pushed by financial authorities.

Key agenda items include proposals to reappoint Woori Financial chairman Jong-ryong Lim (임종룡), Shinhan Financial chairman Ok-dong Jin (진옥동) and BNK Financial chairman Dae-in Bin (빈대인). They are seen as likely to be reappointed, having received favourable recommendations from global proxy advisory firms.

Global proxy advisory firm ISS is known to have expressed support for the reappointment proposals. Another advisory firm, Glass Lewis, also recommended support for Jin's reappointment. Glass Lewis said in a report that Jin's reappointment aligns with enhancing shareholder value and that he has the experience to lead the group's sustainable growth.

Changes to articles of association linked to governance overhaul were also included as key agenda items. Woori Financial put forward a proposal to change the method of appointing the representative director from a board resolution to a shareholder meeting resolution. It also proposed applying a special resolution from the third consecutive term, requiring approval at a special shareholder vote. The move is a pre-emptive step following financial authorities' demand to introduce a special resolution requiring approval by at least two-thirds of attending shareholders for CEO reappointments.

The appointment of outside directors is also one of the key agenda items. This time, however, financial holding companies chose to minimise the scale of outside director replacements, citing board stability.

Among 32 outside directors across the four major financial holding companies, 23 have terms expiring this year, but only 6 are set to be replaced. With most outside directors staying on, that amounts to about 1 to 2 replacements per holding company.

Financial holding companies recommended new outside director candidates who are experts in areas such as financial consumer protection, internal control, governance and artificial intelligence, focusing on strengthening expertise. Still, some assessments say that compared with financial authorities' strong calls for governance overhaul, actual changes in board composition remained limited.

The schedule for announcing financial authorities' governance-advancement plan was also seen as a variable for the meetings. With the announcement delayed to the end of this month, its immediate impact is expected to be limited. Financial authorities are pushing for institutional improvements centred on stronger board independence and greater transparency in CEO succession procedures. In the financial sector, some observers say the delay until after the meetings has raised the likelihood that key proposals, including chairman reappointments, will pass relatively smoothly.

Shareholder-return policies are also drawing interest at the meetings. Major financial holding companies plan to put forward proposals to secure dividend funds by reducing capital reserves. KB Financial plans to submit a proposal to reduce capital reserves and transfer about 750 billion won in capital reserves to retained earnings for use as dividend funds.

Shinhan Financial and Hana Financial are also pushing plans to convert capital reserves of about 990 billion won and 740 billion won, respectively, into retained earnings for use as dividend funds. Earlier, Woori Financial reduced about 300 billion won in capital reserves last year to pay a reduction dividend, and has secured an additional 630 billion won in dividend funds.

In addition, whether to introduce a shareholder-nominated director system has emerged as an issue at the meetings. Woori Bank's labour union is raising concerns about the independence of the process for selecting outside director candidates and is calling for discussions on introducing a director recommendation system by the employee stock ownership association.

In the financial sector, there is a view that the meetings will be a watershed for gauging the direction of future discussions on governance at financial holding companies, as calls to improve governance, expand shareholder returns and overhaul boards converge.

A financial sector official said, "As financial authorities' demands for governance improvements continue, discussions are likely to continue even after these shareholder meetings over CEO succession procedures and strengthening board independence."