SEOUL, Sept. 29 (Korea Bizwire) —The compensation of leaders in major financial institutions has increased too much too fast while their financial performances are not getting any better. Korea Institute of Finance research fellow Kim Woo-jin said in a report “What Makes Global Top-50 Banks Different from Others?” the annual pay of Korean bank CEOs is about triple that of Japanese counterparts despite the fact that the profitability of Korean banks is less than a half of that for global top-50 banks.
For example, Shinhan Financial Group chairman Han Dong-woo earned 2.82 billion won (US$2.69 million) last year including the 30,040 shares paid out as performance pay. It is worth 1.4 billion won as of the end of last year. The same group’s Shinhan Bank president Suh Jin-won took home 2.89 billion won ($2.76 million). Kim Jeong-tae, Hana Financial Group chairman, was paid 3.08 billion won ($2.94 million). This is despite the fact that Korean banks have on average only a tenth of assets and net profit than the Japanese counterparts.
In contrast, TakamuneOkihara, chief executive of Bank of Tokyo-Mitsubishi UFJ, earned last year 121 million yen (US$1.10 million) including the basic pay, performance pay, and stock option. Bank of Tokyo-Mitsubishi UFJ president Nobuyuki Hirano was paid 125 million yen ($1.14 million).
The main reason for Korean banking CEOs are getting an undeserving sum of pay has to do with the fact that the beginning of financial groups in 2001. Prior to the era of financial groups, most bank presidents were paid about 300-400 million won.
To this, financial service firms defended their pay policy by comparing with that of global financial institutions in the United States and elsewhere. They also said the performance-based stock option is proportional to the year’s financial results, which means the CEOs may not get it at all if the performance is not up to a certain level.
Indeed, the pay of the CEOs of Wells Fargo ($7.93 million) and Citigroup ($7.72 million) is much higher than that of Korean counterparts. Still these two banking groups earned net profit of $19.7 billion and $32.3 billion respectively last year, which are 10 to 20 times higher than that of domestic banking groups.
By Sean Chung (email@example.com)