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Salary for Korean banking group CEOs too high compared to profits: market tracker
By 정주원Published : Sept. 28, 2014 - 13:48
Despite lower profits than their overseas peers, South Korea's leading banking groups are paying their CEOs a much better salary, data showed Sunday.
The average annual pay last year for the country's top three banking groups reached an estimated 2.7 billion won ($2.6 million), according to data compiled from multiple financial institutions at home and abroad. By comparison, three top Japanese banking groups paid their CEOs an average 1.25 billion won, based on won-yen exchange rate at the end of 2013 of 1,005 won per 100 Japanese yen.
The three South Korean banking groups are KB Financial Group Inc., Shinhan Financial Group and Hana Financial Group Inc. KB posted $1.7 billion in pre-tax profit in 2013, with Shinhan and Hana logging $1.2 billion and $2.5 billion each.
The three Japanese banking groups include Mitsubishi UFJ Financial Group Inc., Sumitomo Mitsui Financial Group Inc. and Mizuho Financial Group Inc. Mitsubishi UFJ earned $14.7 billion in pre-tax profit last year, followed by Sumitomo Mitsui with $13.5 billion and Mizuho with $9.4 billion.
By tier 1 capital, the core measure of a bank's financial health, KB ranked 68th in the world, with Shinhan and Hana taking 69th and 84th, respectively.
Mitsubishi UFJ was positioned at 10th, while Sumitomo Mitsui and Mizuho ranked 17th and 21th, respectively.
"Officials at Japanese financial authorities whom I met lately were stunned when they heard about South Korean CEOs' annual pay,"
an official at a local financial institution said. "It is apparently a problem that CEOs of local financial groups hold no responsibility for accidents while enjoying great power and getting big pay."
South Korean banking groups, created to make local financial companies strong enough to compete in world markets, have been pounded by criticism for ethical and management lapses. Their employees were found to have engaged in illegal activities, including extending loans that did not meet criteria or in exchange for bribes and misappropriating company funds. Earlier this year, investigators found sensitive information for tens of millions of clients had leaked out from bank and credit card affiliates of these groups.
The same data showed that the pay for South Korean CEOs was also higher than that of U.S. counterparts.
Bank of America (BoA), which posted $16.2 billion in net profit in 2013, paid its CEO $2.26 million in annual salary.
Wells Fargo & Company, which earned $32.3 billion last year, paid its CEO an annual salary of $7.93 million, while Citi, whose net income reached $1.97 million, gave its CEO $7.72 million in annual salary.
Market watchers say the outside members on the board of directors at the banking groups have failed in their role to monitor the management, contributing to the lapses.
The board determines the amount of CEOs' yearly salary based on their performances, but it mostly rubber-stamps decisions made by the inner circle of the board, turning the other way to any management problems.
The watchers argue that the banking groups should raise the transparency of their procedures in setting salaries by making the information public. (Yonhap)
The average annual pay last year for the country's top three banking groups reached an estimated 2.7 billion won ($2.6 million), according to data compiled from multiple financial institutions at home and abroad. By comparison, three top Japanese banking groups paid their CEOs an average 1.25 billion won, based on won-yen exchange rate at the end of 2013 of 1,005 won per 100 Japanese yen.
The three South Korean banking groups are KB Financial Group Inc., Shinhan Financial Group and Hana Financial Group Inc. KB posted $1.7 billion in pre-tax profit in 2013, with Shinhan and Hana logging $1.2 billion and $2.5 billion each.
The three Japanese banking groups include Mitsubishi UFJ Financial Group Inc., Sumitomo Mitsui Financial Group Inc. and Mizuho Financial Group Inc. Mitsubishi UFJ earned $14.7 billion in pre-tax profit last year, followed by Sumitomo Mitsui with $13.5 billion and Mizuho with $9.4 billion.
By tier 1 capital, the core measure of a bank's financial health, KB ranked 68th in the world, with Shinhan and Hana taking 69th and 84th, respectively.
Mitsubishi UFJ was positioned at 10th, while Sumitomo Mitsui and Mizuho ranked 17th and 21th, respectively.
"Officials at Japanese financial authorities whom I met lately were stunned when they heard about South Korean CEOs' annual pay,"
an official at a local financial institution said. "It is apparently a problem that CEOs of local financial groups hold no responsibility for accidents while enjoying great power and getting big pay."
South Korean banking groups, created to make local financial companies strong enough to compete in world markets, have been pounded by criticism for ethical and management lapses. Their employees were found to have engaged in illegal activities, including extending loans that did not meet criteria or in exchange for bribes and misappropriating company funds. Earlier this year, investigators found sensitive information for tens of millions of clients had leaked out from bank and credit card affiliates of these groups.
The same data showed that the pay for South Korean CEOs was also higher than that of U.S. counterparts.
Bank of America (BoA), which posted $16.2 billion in net profit in 2013, paid its CEO $2.26 million in annual salary.
Wells Fargo & Company, which earned $32.3 billion last year, paid its CEO an annual salary of $7.93 million, while Citi, whose net income reached $1.97 million, gave its CEO $7.72 million in annual salary.
Market watchers say the outside members on the board of directors at the banking groups have failed in their role to monitor the management, contributing to the lapses.
The board determines the amount of CEOs' yearly salary based on their performances, but it mostly rubber-stamps decisions made by the inner circle of the board, turning the other way to any management problems.
The watchers argue that the banking groups should raise the transparency of their procedures in setting salaries by making the information public. (Yonhap)
