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Summary of the Nomination Process for the Chairman Nominee of KB Financial Group
2013-06-24In 2012, the Evaluation and Compensation Committee serving under the Board of Directors of KB Financial Group Inc. (“KBFG”) initiated a CEO succession planning program and identified a preliminary pool of approximately 100 candidates.
The Evaluation and Compensation Committee (which was comprised of five non-executive directors) established 20 specific evaluation criteria grouped into four categories, “Personal Character and Qualities as CEO”, “Comprehensive Leadership Ability as CEO”, “Experience and Expertise in the Financial Industry and Management of Financial Institutions”, and “Management Ability Suitable for KB Financial Group’s Business Environment”, which were utilized to evaluate each candidate in the preliminary candidate pool, and assigned each candidate one of four ratings: “A,” “B,” “C” and “Not Rated.”
Young-Rok Lim, the president of KBFG, Byong Deok Min, the president and chief executive officer of Kookmin Bank, and Gi-Eui Choi, the president and chief executive officer of KB Kookmin Card Co., Ltd., were among over ten candidates (out of the preliminary pool of approximately 100 candidates) who were rated “A”, which included former officials of financial regulatory or supervisory agencies, presidents of other domestic banks and other external candidates.
In early May 2013, KBFG established a Chairman and CEO Nominating Committee* , consisting of nine non-executive directors, and the committee established criteria and procedures for the evaluation and selection of candidates as well as a timeline for its work, which were closely adhered to throughout the selection process. The committee also compiled an initial chairman candidate list of over 40 candidates, consisting of candidates who were rated “A” or “B” in the CEO succession planning program and candidates who were recommended by three executive recruiting firms.
On May 23, 2013, the Chairman and CEO Nominating Committee selected the top 11 candidates based on its evaluation of the candidates on the initial chairman candidate list. The selection was made through voting by secret ballot and without prior discussion among the committee members as to their preferences among the candidates. Of the 11 candidates, six were former or current executives of KBFG or its subsidiaries, including Young-Rok Lim, the president of KBFG, Byong Deok Min, the president and chief executive officer of Kookmin Bank, Gi-Eui Choi, the president and chief executive officer of KB Kookmin Card, Kyung-Woo Nam, a former president and chief executive officer of former KB Futures Co., Ltd., Young-Key Hwang, a former chairman and chief executive officer of KBFG, and Kap-Soo Oh, a non-executive director of Kookmin Bank. The other five candidates consisted of former or current executive officers of competitor banks and former top executives of financial supervisory body.
On June 3, 2013, the Chairman and CEO Nominating Committee further narrowed down the chairman candidate list from 11 to four candidates after a second round of evaluations. The selection was made through voting by secret ballot and without prior discussion among the committee members as to their preferences among the candidates. Excluding candidates who announced their intention not to compete for the position, the second round of evaluations conducted by the Chairman and CEO Nominating Committee covered the remaining seven candidates and referenced two reputation inquiry reports prepared by two executive recruiting firms.
The four candidates that were selected by the Chairman and CEO Nominating Committee for in-depth evaluation were Young-Rok Lim, the president of KBFG, Byong Deok Min, the president and chief executive officer of Kookmin Bank, Gi-Eui Choi, the president and chief executive officer of KB Kookmin Card, and a former executive officer of a competitor bank.
On June 5, 2013, the Chairman and CEO Nominating Committee conducted an in-depth interview lasting 90 minutes with each of the four remaining candidates, as part of its third round of evaluations. The in-depth interviews were conducted as question-and-answer sessions during which the committee members had a detailed discussion with each candidate regarding his vision for KBFG as well as his perceived strengths and weaknesses. Following these interviews, the committee unanimously selected Young-Rok Lim, the president of KBFG, as its nominee for chairman and chief executive officer.
On June 12, 2013, the Chairman and CEO Nominating Committee performed a verification of the qualifications of Mr. Lim under the Financial Holding Company Act and, after confirming that there were no grounds for his disqualification, recommended him to the Board of Directors of KBFG as the nominee for chairman and chief executive officer. At the meeting of the Board of Directors which followed thereafter, the board unanimously resolved to propose Mr. Lim as the nominee for chairman and chief executive officer at the extraordinary general meeting of shareholders of KBFG.
As evidenced by the above, the Chairman and CEO Nominating Committee followed an extremely thorough and fair process in selecting Mr. Lim as its nominee, involving the use of data compiled through the CEO succession planning program, multiple rounds of evaluation and screening of candidates, the use of external professional sources such as references and reports of executive recruiting firms, and adherence to pre-existing detailed procedures established under internal regulations and by the committee.
Mr. Lim received an “A” rating in the CEO succession planning program that commenced in 2012. (A total of over ten candidates received an “A” rating.)
Mr. Lim was overwhelmingly ranked first during the initial round of evaluations on May 23 and second round of evaluations on June 3 (which included reputation inquiry reports) by the Chairman and CEO Nominating Committee, and was also unanimously ranked first by nine out of nine members of the committee in the final round of evaluations on June 5 (which included in-depth interviews).
The fact that Mr. Lim was selected by unanimous approval of the Chairman and CEO Nominating Committee, for the first time in KBFG’s history, evidences the common conclusion reached by the committee’s members that he was clearly the best qualified person relative to all the other candidates to become KBFG’s next chairman and chief executive officer.
In the CEO succession planning program as well as all of the evaluations conducted by the Chairman and CEO Nominating Committee during the past year, Mr. Lim received overwhelmingly high marks compared to the other candidates, including former chairmen of the Financial Services Commission, former and current chief executive officers of companies within KBFG and former and current chief executive officers of competitor banks.
Mr. Lim’s consistently high marks were based on the superior evaluation he received compared to the other candidates in terms of leadership ability and other basic attributes required of a chief executive officer. He received overwhelmingly positive reviews for his broad experience and expertise in the financial industry, spanning both the government and the private sector, and in the management of financial institutions. In addition, he received strong support as the person best equipped to lead KBFG in overcoming the challenging environment currently faced by it, based on his experience as KBFG’s president during the past three years.
Further details regarding the background for Mr. Lim’s selection by the Chairman and CEO Nominating Committee as the nominee for chairman and chief executive officer of KBFG are as follows:
• Mr. Lim’s broad-based knowledge of and long-standing involvement in the overall Korean financial system and financial markets, built upon on his background and experience in the establishment of finance-related policies in the public sector, were viewed as major potential sources of strength in heading KBFG, the largest financial institution in Korea.
• Mr. Lim was highly regarded for his success in leading negotiations relating to Korea’s free trade agreements and other multilateral trade negotiations. The outstanding leadership, communication skills and ability to mediate and resolve issues and conflicts which he demonstrated in those contexts were viewed as critical for the position of chairman and chief executive officer of a large financial group like KBFG, which involves leading an expansive organization and resolving conflicts among a variety of interested parties. His qualifications in this regard were judged as superior to those of all the other candidates.
• Mr. Lim’s hands-on experience in directing the formulation and implementation of policies relating to the modernization of the Korean capital markets and the enhancement of the competitiveness of the Korean financial services industry, at the time of adoption of the Financial Investment Services and Capital Markets Act in 2007, was regarded as directly relevant and potentially useful, in terms of exercising management judgment and establishing strategic direction, for a future leader of a comprehensive financial group like KBFG that encompasses both banking and non-banking business portfolios.
• Based on his broad experience and in-depth knowledge as described above, as well as his wide-ranging market network, Mr. Lim was viewed as having demonstrated strong execution capability and excellent leadership in, resolving major business issues faced by KBFG during his tenure during the past three years as its president, including the disposition of KBFG’s treasury shares.
• Mr. Lim was regarded as having made an important contribution to enhancing the stable profitability footing of KBFG, by focusing on strengthening its previously weak risk management system and preemptively reducing its exposure to high-risk industries such as shipbuilding and real estate project finance, thereby improving the group-wide credit portfolio as well as KBFG’s overall asset quality management.
* KBFG’s internal regulations regarding its Chairman and CEO Nominating Committee provide that the committee shall consist of
all of the non-executive directors of KBFG. Accordingly, all nine non-executive directors of KBFG were included in the committee.
The members of the committee were Kyung Jae Lee, Jae Wook Bae, Young Jin Kim, Kun Ho Hwang, Jong Cheon Lee,
Seung Hee Koh, Young Kwa Kim, Young Nam Lee and Jae Mok Cho, and Seung Hee Ko was unanimously elected as the
chairman of the committee at its first meeting.