South Korea’s largest proxy adviser, alongside Institutional Shareholder Service and Glass Lewis, has urged KB Financial Group shareholders against the appointment of two outside directors apparently recommended by the firm’s labor union, industry sources said Tuesday.

The Korea Corporate Governance Service has officially requested KB’s shareholders to vote against the appointment of Sustinvest CEO Ryu Young-jae and Seoul National University environmental studies professor Yun Sun-jin in an upcoming shareholders meeting scheduled for Nov. 20, the sources said.

The two candidates were tapped by KB’s group of employee shareholders –- which currently owns a 1.73 percent stake in the banking group –- on Sept. 29, as “environmental, social and governance experts.”

According to a KB official, though not all KB employees with stock options are labor union members, the head of the employee shareholder group is also the chief of the firm’s labor union at the moment, allowing the chief to release statements on behalf of the two separate groups.

The sources cited a report released to the investors by the KCGS on Monday.

“KB Financial Group is already a leading ESG institution with an outstanding governance structure and has been implementing social responsibilities,” the KCGS report said.

“We believe it is extremely unlikely that the appointment of outside directors will lead to an improvement in shareholder value (in this case),” it added.

The KCGS’ remarks echo previous statements released by other proxy advisers -– ISS and Glass Lewis.

According to local news reports on Nov.2, The ISS has recently advised KB’s shareholders to vote against appointment of Ryu and Yun, saying that “the union fails to present a compelling case for change at the company.”

It stressed that KB has been appointing its outside directors with a fair and strict yardstick and the latest recommendation has not been in line with such standards.

The ISS even released a second report on the matter after KB’s group of employee shareholders criticized the global proxy adviser’s report as “contradictory.”

The ISS has repeatedly locked horns with KB’s labor union since 2017 when it started to officially recommend outside board members. KB’s shareholders have so far voted against labor-recommended candidates.

Despite repeated attempts, the labor union is likely to take a step back this year as well, as KB’s overseas shareholders, which hold more than 60 percent stake combined, is projected to heed to ISS and Glass Lewis’ advices. Its shareholders include JP Morgan with a 6.4 percent stake and the Government of Singapore with a 2.47 percent stake. KB Financial Group's largest shareholder is Korea’s National Pension Service with a 9.97 percent stake.

By Jung Min-kyung (mkjung@heraldcorp.com)