Financial firms rebut mounting criticism over compensation
Korea’s financial regulators continued their push to force the local financial industry to shape up, but changed their tone, mindful of excessive meddling in the private sector.
The industry is under fire for getting away with large paychecks and handsome dividends amid growing public anger over corporate greed.
In the past week, the regulators led by the Financial Services Commission criticized the banking and brokerage industries here, citing enormous profits pocketed by top executives and major shareholders.
Korea’s major banks and financial institutions have received public funds to stay afloat in the past, ostensibly for the benefit of the broader economy.
The trouble is that those financial companies are now garnering easy money by charging high commission on customers at a time when the country’s overall economy is mired in slower growth, and danger signals from the eurozone and U.S. economy are making investors fearful of another global economic recession.
Against this backdrop, FSC Chairman Kim Seok-dong recently called for the industry to rid itself of excessive greed and reflect upon its morality.
He earlier said, “The financial sector has to come up with a solution to overhaul the salary system that offers millions of won to some executives.”
Between 2006 and 2010, the country’s top four financial holding companies ― Shinhan, Woori, KB, Hana ―- paid out 3.8 trillion won in dividends, which is equivalent of 17.5 percent of their combined net profit during the period.
Dividends distributed by brokerages were bigger in terms of proportion. The top five firms -― Samsung, Daewoo, Woori, Hyundai, Korea ―- delivered 1.8 trillion won in dividends, or 32.4 percent of their net income.
The financial industry is under criticism because it paid out extremely generous dividends to shareholders compared to other industries. Compensation packages at major financial firms have also surpassed other industries.
But financial firms on Wednesday rebutted rising public criticism of their large paychecks and high profit margins, saying that curbing profit-focused business practices and overhauling their pay systems would be unreasonable.
Local lenders are also defending themselves against charges they are likely to rake in a record 20 trillion won in combined net profit this year on the back of widening interest margins.
