KB Financial Group has narrowed the pool of candidates for its next chairman to 6 and begun the selection process in earnest. KB Financial has confirmed its first-round candidates ahead of a delayed announcement by financial authorities on governance reforms for financial holding firms. That has put the transparency of the selection process in focus.

KB Financial Holdings' Chairman Candidate Recommendation Committee held a meeting on Thursday and confirmed a shortlist of 6 candidates for the next chairman, including 4 internal and 2 external candidates.

The internal candidates were KB Financial Holdings Chairman Yang Jong-hee (양종희), KB Financial Holdings division head Jae-geun Lee (이재근), KB Financial Holdings division head Chang-kwon Lee (이창권) and Kookmin Bank CEO Hwan-joo Lee (이환주).

The external candidates included former Woori Bank CEO Kwang-seok Kwon (권광석) and 1 candidate who asked to remain anonymous. KB Financial did not disclose the name of the other external candidate at their request.

With the shortlist confirmed, Yang's bid for re-election has been formalised. At the same time, the internal succession line-up and the external candidates' practical competitiveness have emerged as key variables in the upcoming vetting process. The internal candidates include the incumbent chairman, holding company division heads and the CEO of key subsidiary Kookmin Bank. Two external candidates were included, but with 1 requesting anonymity, it will be limited how openly the actual competitive line-up is revealed.

The committee will conduct first-round interviews with the 6 shortlisted candidates on Aug. 27 and then narrow the field to 3. It will then hold second-round in-depth interviews with the 3 candidates on Sept. 11 and confirm 1 final candidate. The final candidate is expected to be appointed as the next chairman at an extraordinary shareholders' meeting in November after qualification reviews under relevant laws and recommendation procedures by the committee and the board.

The key question in this process is whether Yang wins another term. His term runs through Nov. 20. The industry sees Yang as having increased his chances of re-election by delivering results on both performance and shareholder returns since taking office.

KB Financial posted consolidated net profit of 5.843 trillion won last year. It was a record high, up 15.1 percent from a year earlier.

Net profit rose 11.5 percent from a year earlier to 1.892 trillion won in the first quarter of this year. Its total shareholder return ratio last year was 52.4 percent, up 14.4 percentage points from 38.0 percent in 2023. As competition among leading financial groups continues, showing both stable earnings power and expanded shareholder returns is cited as a factor favouring Yang.

Still, the selection is not a structure that can be decided on performance alone. That is because financial authorities have not yet finalised their governance reform plan for financial holding firms. The plan was initially expected to be made public by Financial Supervisory Service Governor Chan-jin Lee (이찬진) before KB Financial announced its first shortlist, but it is known to remain undecided as last-minute coordination has dragged on. As a result, KB Financial has finalised its first-round candidates before the authorities set new governance standards.

Discussions on governance reforms gained pace after concerns raised late last year that selection procedures for top executives in the financial sector were being run behind closed doors. Financial authorities formed a task force early this year and set a policy to produce a reform plan ahead of the March shareholder meeting season, but the announcement has repeatedly been delayed. A March date was discussed and then cancelled, and the final plan is known to be delayed further as detailed coordination by financial authorities and an approval process at the presidential office have taken longer.

In the financial sector, some raise the possibility that the reform plan may be released around a presidential work report scheduled for mid-month. But KB Financial has already chosen its first-round candidates, making it difficult for any new standards to be immediately reflected in the shortlist results. Instead, the committee's evaluation criteria and vetting methods are expected to draw greater attention during the second narrowing in August and the final selection in September.

The reform plan is known to include strengthening transparency in chief executive succession procedures, enhancing outside director independence, reorganising candidate pool management systems and improving performance-based pay structures. In particular, a key issue is reported to be institutionalising limits on re-election or total tenure to check long-term chairmanships at financial holding firms. The core is to reduce the practice of a board favourable to an incumbent chairman leading the successor selection process and to create a structure in which outside directors can independently vet candidates.

That has increased the importance of the committee's role. The committee is made up of all outside directors and is responsible for candidate vetting. Whether it evaluates internal and external candidates by the same standards and provides external candidates with conditions to compete in practice is expected to determine the credibility of the succession process.

KB Financial is also working to strengthen procedural fairness. It has supplemented its candidate vetting process by hearing opinions from major shareholders and providing external candidates with sufficient time to prepare.

As criticism has repeatedly pointed out that internal candidates have an advantage in organisational understanding and access to information, a key question is whether external candidates are included in name only or can be placed in a real competitive line-up.

Hwa-joon Cho (조화준), chair of KB Financial's chairman candidate recommendation committee, said, "We will continue to make efforts so that the best CEO can be selected in line with the trust of shareholders and customers through a transparent and objective process of candidate verification and evaluation."

A financial industry official said, "In KB Financial's case, it has come to draw attention as the timing intersects with the governance reform plan for financial holding firms." The official added, "There is a strong possibility that the argument for re-election, backed by record performance and results, will gain strength, but it remains to be seen whether stricter vetting standards than in previous years may be applied in connection with the governance reform discussions."