The Korean Model of Corporate Governance: Issues and Lessons in Reform of Bank Governance

Recent financial crises in emerging market countries highlighted the importance of a robust and efficient banking system in pursuing sustainable economic growth. Korea's economic crisis also resulted from the failure of the banking system in performing its genuine role of financial intermediation. Over the last six years since the 1997-98 financial crisis, remarkable progress has been made in reconstructing Korea's outmoded banking system. This article first takes on a historical approach in tracing the development of the banking institutions in Korea since the 1960s. Then, it focuses on the corporate governance reform efforts of Korean commercial banks through a case study of Woori Bank - the largest government-intervened commercial bank in Korea. Overall, the reform efforts at Woori Bank have been impressive, resulting in a strengthened governance structure, a better defined set of duties and responsibilities for the bank CEO and the board, an upgraded internal control system, and an enhanced risk management and corporate monitoring. Yet, further reform agendum need to be scrutinized.