Corporate governance is a window into the way a company operates.
At IBK, we keep that window as wide open as possible, and as a result
the Board of Directors and management are able to take the lead in
wide-open management and principles-based management,
maintaining an advanced corporate governance.
As of December 31st, 2011, the Board of Directors of IBK is comprised of seven directors: the Chairman & CEO, one Deputy CEO & Senior Executive Vice President, one Director & Senior Executive Vice President and four outside directors. The Deputy CEO & Senior Executive Vice President and the Director & Senior Executive Vice President are appointed by the Financial Services Commission (FSC), based on the recommendation of the Chairman & CEO, for a three-year term. The outside directors, who make up the majority of the Board, are selected based on their knowledge and experience in business management, economics, accounting, law or the SME sector, and are also appointed by the FSC on the recommendation of the Chairman & CEO. The Chairman & CEO of IBK, who supervises all activities of the Bank and acts as its chief representative, is appointed by the President of the Republic of Korea on the recommendation of the Chairman of the FSC.
The Board of Directors (“BOD”) has the authority to decide important matters relating to the Bank’s business. In 2011, the Board held eleven meetings to discuss 18 reported items and 23 items for resolutions. The first BOD meeting of 2011 was held on February 4, during which the BOD discussed a resolution on the change in the investment plan for a TV home shopping consortium exclusively for SMEs. At the second meeting, dated March 4, resolutions were made regarding the calling of the shareholders’ meeting and approval of the settlement of accounts and the changes in the Articles of Association. At the 11th meeting, held on December 29, resolutions were made on the 2012 budget and basic risk management plans, and changes to the 2012 business plans were reported.
IBK will continuously strive to meet the highest global standards of corporate governance through regular BOD meetings, discussions and activities in 2012. The Bank’s management and its Board will spearhead the development of an open and principles-based management culture thereby fostering constructive relations with all stakeholders, and maintaining sound corporate governance.
There are three Committees under the BOD: the BOD Governance Committee, the Management Compensation Committee and the Risk Management Committee. These Committees collectively serve to promote the transparent and balanced management of the Bank. The Management Compensation Committee, in particular, is comprised entirely of outside directors to ensure its independence.
BOD Governance Committee _The BOD Governance Committee, headed by the Chairman & CEO of the Bank, is comprised of six inside and outside directors. The Committee reviews ways to improve the efficiency and operations of the BOD and Committees, facilitates the BOD’s activities, and maintains contact with shareholders and stakeholders to gather their opinions, safeguard their rights and raise overall shareholder value. The Committee also recommends candidates for outside directors who will in turn be recommended to the FSC by the Chairman
& CEO of IBK, appoints division heads recommended by the Chairman & CEO, and deliberates on other matters deemed necessary by the BOD.
Management Compensation Committee _ The Management Compensation Committee consists of four outside directors. It reviews the systems for evaluating and rewarding the management performance of inside directors and division heads.
Risk Management Committee _ The Risk Management Committee is composed of four inside and outside directors. The Committee is the top decision-making authority on the Bank’s risk management policies, establishing and approving such policies in order to maintain capital adequacy and manage various types of risks that may arise in the course of the Bank’s business.
IBK used to be entirely owned by the Korean government before 1994. Since then, the government’s share ownership has gradually decreased through the public offering of new stock and an increase in employee stock ownership. Korea Development Bank (KDB) and the Export-Import Bank of Korea (Korea Eximbank) emerged as new shareholders of IBK in 1999 and 2000 respectively. As of December 31st, 2011, the government’s stake amounted to 65.1%, or 76.3% including its shares in the Korea Finance Corporation and Korea Eximbank. Foreign ownership reached 11.68% of outstanding stock as of December 31st, 2011.
As seen from its corporate structure, the Bank’s close links to the government in both its corporate governance and its ownership are due to the Bank’s historical role in providing support for SMEs as part of government policy. IBK is supported by the Korean government so that its mission to support SMEs can be fulfilled in a stable manner, thereby guaranteeing a safe channel of support for the SME sector.
Due to the government ownership reaching over 70%, and its purpose of establishment, it has been subject to the government’s management and supervision. It was designated as a public institution by the government in 2007, so that it could be sure to continuously strengthen its management transparency. As a result, the Bank’s management was somewhat regulated, and there were various challenges in competing with commercial banks.
In January 2012, however, the government (via the Ministry of Strategy and Finance) lifted the designation of IBK as a public institution, as the Bank’s abilities were recognized to grow through transparent and autonomous management. The expansion of autonomy in personnel management, budget administration and management evaluation will serve as an opportunity to strengthen the Bank’s market competitiveness by eliminating obstacles in competing with commercial banks, which will eventually increase the value of the shareholders.
Despite the lifting of the designation as a public institution, the Bank’s level of financial security will not change, as the government’s commitment to cover losses as stipulated in the ‘Industrial Bank of Korean Act,’ and the Bank’s prestige as a national policy bank will continue to be maintained.