As South Korea's major financial holding companies proceed with governance reforms, debate is intensifying over the optimal number of inside directors on their boards. While a sole inside director system—where only the chairman serves—strengthens board independence, a multiple inside director structure better captures frontline management perspectives, industry observers say.
According to financial industry sources on March 16, major financial holding companies have put board reorganization measures, including new outside director appointments, on the agenda for their annual general meetings this month. The industry distinguishes between sole inside director systems and multiple inside director systems based on whether executives other than the chairman participate on the board.
KB Financial Group has Chairman Yang Jong-hee and KB Kookmin Bank CEO Lee Hwan-joo serving together on its board. Shinhan Financial Group's board includes Chairman Jin Ok-dong and Shinhan Bank CEO Jeong Sang-hyuk. Hana Financial Group operates with Chairman Ham Young-joo alongside Vice Chairmen Lee Seung-yeol and Kang Sung-mook as inside directors.
In contrast, Woori Financial Group Chairman Lim Jong-ryong serves as the sole inside director. This structure has been maintained since Lim took office in 2023 and then-President Lee Won-duk resigned.
When only one inside director serves on the board, operations can center on outside directors, strengthening independence. This achieves the separation between board and management that governance evaluators consider critical. The absence of subsidiary CEOs also reduces potential conflicts of interest with affiliates. However, critics note this structure may lack sufficient frontline management information for realistic decision-making.
Multiple inside director systems allow subsidiary CEOs and executives to share management information immediately through direct board participation. Decision-making grounded in frontline experience can enhance competitiveness. However, as inside director numbers increase, boards risk becoming management-dominated. The board's ability to provide checks on the chairman may become particularly limited.
"Governance ultimately comes down to people, so how you operate matters more than any single correct answer," a financial industry official said.