Major Banks Increase Executive Bonuses Amid Rising Financial Incidents
In a troubling trend, major South Korean banks have raised executive bonuses even as financial scandals unfold. Critics argue that while these institutions enjoy record profits, they are shifting the losses from these incidents onto society.
According to data submitted to the National Assemblys Political Affairs Committee by Representative Lee Heon-seung of the People Power Party on the 26th, the total executive bonuses at Kookmin Bank last year amounted to 14.2 billion won, averaging 315.21 million won per person.
Hana Banks executive bonuses for the same year totaled 8.9 billion won, averaging 120.4 million won per individual, nearly double that of 2023, which was 4.8 billion won, averaging 71.2 million won per person. Shinhan Bank reported a total bonus of 148 billion won for all employees, reflecting a 3% increase during the same period.
While bonuses have surged, the number of financial incidents has also risen sharply. According to Rep. Lees office, between January and August of this year, the four major banks recorded 74 financial incidents with a total financial impact of 197.2 billion won. This marks a significant increase of 19.4% in the number of incidents and a staggering 44.2% in the financial impact compared to last years total of 62 incidents costing 136.8 billion won.
Nevertheless, since 2016, there have been no cases of executives from the four major banks being penalized by the Financial Supervisory Service (FSS) in connection with these financial incidents. This has led to growing criticism that management is pocketing performance bonuses while transferring the costs of financial mishaps onto society.
In response to these issues, financial authorities are considering legislation to introduce a clawback system, which would allow for the recovery of bonuses when incidents occur. The current regulations governing the governance of financial companies state that if losses occur related to an executives responsibilities during the deferred payment period, the performance bonuses due can be recalibrated to reflect the realized loss. However, the regulations are vague and poorly enforced in practice.
There are indications that stronger measures may be pursued, including the recovery of bonuses even after executives have retired if a financial incident is uncovered.
The ongoing situation raises serious questions about accountability and corporate governance within the banking sector, as the balance between rewarding performance and ensuring ethical practices remains precarious.
According to data submitted to the National Assemblys Political Affairs Committee by Representative Lee Heon-seung of the People Power Party on the 26th, the total executive bonuses at Kookmin Bank last year amounted to 14.2 billion won, averaging 315.21 million won per person.
Hana Banks executive bonuses for the same year totaled 8.9 billion won, averaging 120.4 million won per individual, nearly double that of 2023, which was 4.8 billion won, averaging 71.2 million won per person. Shinhan Bank reported a total bonus of 148 billion won for all employees, reflecting a 3% increase during the same period.
While bonuses have surged, the number of financial incidents has also risen sharply. According to Rep. Lees office, between January and August of this year, the four major banks recorded 74 financial incidents with a total financial impact of 197.2 billion won. This marks a significant increase of 19.4% in the number of incidents and a staggering 44.2% in the financial impact compared to last years total of 62 incidents costing 136.8 billion won.
Nevertheless, since 2016, there have been no cases of executives from the four major banks being penalized by the Financial Supervisory Service (FSS) in connection with these financial incidents. This has led to growing criticism that management is pocketing performance bonuses while transferring the costs of financial mishaps onto society.
In response to these issues, financial authorities are considering legislation to introduce a clawback system, which would allow for the recovery of bonuses when incidents occur. The current regulations governing the governance of financial companies state that if losses occur related to an executives responsibilities during the deferred payment period, the performance bonuses due can be recalibrated to reflect the realized loss. However, the regulations are vague and poorly enforced in practice.
There are indications that stronger measures may be pursued, including the recovery of bonuses even after executives have retired if a financial incident is uncovered.
The ongoing situation raises serious questions about accountability and corporate governance within the banking sector, as the balance between rewarding performance and ensuring ethical practices remains precarious.
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