South Korea’s Financial Supervisory Service, it seems, just cannot keep its head.
Just a few short weeks after the previous governor of the FSS, Choe Heung-sik had stepped down on 12 March, his successor as governor, Kim Ki-sik, resigned from the hot seat on 16 April.
The FSS is a serious body: It regulates both banks and non-bank financial entities. And both Choe and Kim were serious players: Choe had previously headed a major Korean banking group, while Kim had been a National Assemblyman.
Skeletons in closets can still bite asses
But regardless of their competence in overseeing South Korea’s sole financial sector regulatory agency, politicians forced both men out for reasons unrelated to their management competence, but for alleged errors of judgment in their previous occupations.
Choe was faulted for having transgressed against the neutral hiring code at his bank, Hana Bank. Apparently, he considered it not to be against bank regulations, nor against generally understood rules of fair play, to take the employment application of the son of a chum to the bank’s Human Resources office to hand it over in person. His action was interpreted as pressuring the HR department to offer the job to that particular candidate. Choe stepped down from the FSS in atonement.
Kim was faulted for political donations he had received and deployed while a member of the National Assembly between 2012 and 2016. Kim had apparently received funds from various financial entities to support his overseas business trips. Towards the end of his term, he donated KRW50 million (US$46,700) of funds that had not used for trips to the Korea Institute of the Future, a foundation he headed while in office.
In reviewing Kim’s receipt of funding from financial institutions for his trips and for his foundation, the National Election Commission found fault with both, but especially with his donation to the institute. According to the NEC, a member of the National Assembly can pay a regular membership fee to a civic group or entity, but if the amount given is much larger than normal for such purposes, it violates Korea’s – notably stringent – National Election Law.
The lessons for high-level public appointees offices in Korea are clear: Don’t take office if there are skeletons in your closet. And if you do, be prepared to resign promptly when your activities are revealed via the local press or via online investigations by citizens that go viral.
Out with the old, in with the new
Each time a new president takes office, most existing heads of government entities resign, and new executives are appointed. During this merry-go-round, opposition politicians gleefully filter appointees through an ultra-fine tooth comb. All too often, otherwise competent officials end up either not being appointed or resigning – even those like Kim, who deny any wrongdoing.
“In a very close-knit society such as in Korea, there is intense competition between political factions that back favored candidates for appointive positions, and once these officials take office, very often their political opponents do their best to find some faults in the officials’ backgrounds that would perhaps be considered serious enough to force them from office,” said Rodney Johnson, the Seoul-based CEO of the risk advisory firm Erudite Risk. “We see this pattern again and again, no matter which party controls the administration.”
The press likewise jump in with both feet. Korea’s leading daily, the conservative Chosun Ilbo, thundered, “The administration’s selection process (in choosing Kim) was flawed and its investigation was a failure. Those officials at the Blue House [Korea’s presidential residence] by not taking responsibility, in this case, may be opening the way to a second Kim Ki-sik incident that could be repeated anytime.”
Political daggers are constantly unsheathed. Although the administration was reluctant to see Kim step down, opposition parties were insistent and even demanded an apology from President Moon. (He declined to offer one.) Now, once again, the administration must find another person with experience in finance to lead the FSS.
Meanwhile, the public is (temporarily) satisfied at the blood-letting. One retired Korean, “Ms Chang,” who requested that she be identified only by her surname snarled, “These politicians in Korea try to get away with all kinds of foolish behavior. They just don’t think that the standard rules that everybody else have to live by apply to them!”
While self-indulgence by politicians is by no means an exclusive to Korea, it does seem to garner more attention here than in other OECD countries. Politicians need to be on their toes alert: Korean netizens and press are on constant watch.
Could Korea’s public become more tolerant in regard to the backgrounds of their officials? The risk is clear for Erudite Risk’s Johnson. “If the Koreans set too high a bar for government officials, they will find themselves with the least experienced people in charge of major units of government, and when things go wrong they will have only themselves to blame,” he said.
Yet while both public and media happily put the boot into any official who has transgressed in the past, they are far more reluctant to spotlight the (endlessly repeated) errors of the founding family members of the chaebols, the sprawling business and industrial groups.
Cases in point? Lotte Group Chairman Shin Dong-bin, is in prison for 30 months for bribery in the scandal that led to the overthrown of former president, Park Geun-hye.
Samsung’s de facto head Lee Jae-young was sentenced to several years for bribery in the same scandal but walked back into the executive suite after just a year behind bars.
Park, meanwhile, is serving a 24-year term.
This chasm in Koreans’ tolerance between public officials and business chiefs is both vast and puzzling, and shows no signs of narrowing any time soon.
Meanwhile, if you know anyone willing to fill the vacant FSS slot, please send applications to the Blue House.