[2021 National Audit] "I'm Sorry, I'm Sorry"... Kakao's Kim Beom-su Repeatedly Bowing His Head (Comprehensive)

Kim Beom-su, Chairman of Kakao, is attending the National Assembly's inspection of the Fair Trade Commission held by the National Assembly's Political Affairs Committee on the 5th, responding to questions from lawmakers. Photo by Yoon Dong-joo doso7@

[Asia Economy Reporters Kang Nahum and Boo Aeri] Kim Beom-su, chairman of Kakao, appeared at the National Assembly's Political Affairs Committee audit on the 5th and repeatedly apologized for various controversies surrounding Kakao, including infringement on local small businesses. He emphasized the intention to withdraw from businesses infringing on local markets and announced a management policy focusing on expanding overseas ventures and future technological innovation. He also apologized several times regarding suspicions and controversies related to K-Cube Holdings.

"K-Cube Holdings to Transition into a Company Fulfilling Social Responsibility"

Kim, who appeared as a witness at the National Assembly's Political Affairs Committee audit on the 5th, was intensely questioned by lawmakers about tax evasion suspicions involving K-Cube Holdings, excessive franchise taxi fees by Kakao Mobility, and infringement on local small businesses.

In particular, lawmakers spent considerable time probing suspicions related to K-Cube Holdings, which is effectively Kakao's holding company. Yoon Chang-hyun, a member of the People Power Party, criticized K-Cube Holdings' futures investment details, asking, "What exactly is K-Cube Holdings? Is it a playground for the family's financial investments?"

K-Cube Holdings is a company wholly owned by Chairman Kim and is the second-largest shareholder of Kakao. Recently, it was reported that Kim's children have worked at this company, which sparked controversy.

In response, Chairman Kim explained, "After establishing Kakao, K-Cube Holdings halted all business progress due to conflicts of interest," adding, "We are currently preparing to transition it into a company that fulfills social responsibility."

He continued, "I apologize for causing controversy and will expedite the transition schedule to prevent further issues."

Regarding allegations of indirect tax evasion through K-Cube Holdings, Kim strongly denied them. When Democratic Party lawmaker Yoon Kwan-seok pointed out, "Isn't K-Cube Holdings operated as a loss-making company for tax evasion purposes due to stock-backed loans?" Kim dismissed this, saying, "Although it is running at a deficit due to stock-backed loans, it was not established for tax evasion."

On suspicions that the 1.4 billion KRW retirement pay received by Kim Hwa-young, former CEO of K-Cube Holdings and Kim's younger brother, was for paying stock gift taxes, Kim said, "The retirement process was conducted within legal boundaries," and "Stock gifts were given to all family members related to me, and I understand that CEO Kim paid the stock gift tax by selling some of the shares."

Regarding criticism that the retirement pay was excessive, he said, "I heard that tens to hundreds of billions of won in profits were made through asset management, so I consider it a performance bonus," but also admitted, "Even I think the retirement pay was somewhat high."

Chairman Kim Beom-su of Kakao is attending the National Assembly inspection of the Fair Trade Commission and others held by the National Assembly's Political Affairs Committee on the 5th. Photo by Yoon Dong-joo doso7@

Kakao Mobility Faces Monopoly Controversy

The excessive franchise taxi fees of subsidiary Kakao Mobility also came under scrutiny. Min Byung-duk, a Democratic Party lawmaker, criticized Chairman Kim, saying, "Initially, they offered low or free services to eliminate competitors and secure market dominance, then engaged in typical monopolistic behavior," adding, "A 20% franchise taxi fee is excessive."

In response, Chairman Kim apologized for causing controversy, saying, "The CEO of Kakao Mobility also understands the issue, so many corrective measures will be implemented." He added, "I heard that practically about 5% is returned as a burden, and the platform's stakeholder relationships have not yet been fully established."

He further explained, "As users become more active, fees should gradually decrease," and "From the perspective of building a taxi ecosystem, the profit structure should be a win-win between the company and partners. We are currently in the early stages, experimenting with various approaches."

"Withdrawing from Businesses Infringing on Local Markets... Focusing on Future Technological Innovation"

Chairman Kim also announced a management policy focusing on expanding overseas ventures and future technological innovation. He said, "The responsibility to distinguish what Kakao should and should not do has truly increased," adding, "We will reorganize what needs to be reorganized and strive to focus on innovation in global and future technologies."

When asked for a public message regarding platform ecosystem revitalization, he said, "I believe platforms have both bright and shadowed images. The bright side is that even without capital, connections, or technical knowledge, people have opportunities to participate in the market," adding, "Kakao will never enter industries that infringe on local small businesses and will definitely withdraw. We will actively seek ways to support local small businesses."

Kim Beom-su, Chairman of Kakao, attended the National Assembly's inspection of the Fair Trade Commission held by the National Assembly's Political Affairs Committee on the 5th, responding to questions from lawmakers. Photo by Yoon Dong-joo doso7@

Apologizes to Shareholders Amid Kakao Stock Price Decline

Chairman Kim also addressed the declining Kakao stock price amid social criticism. Responding to lawmaker Kim Byung-wook's question about how he evaluates shareholders' dissatisfaction, he said, "I feel regretful and sorry."

However, regarding criticism that the continuous IPOs of subsidiaries such as Kakao Bank, Kakao Games, Kakao Pay, and Kakao Mobility are lowering the parent company's shareholder value, he expressed an opposing view.

He said, "Kakao's rapid growth was largely due to granting authority to subsidiaries and attracting investments to quickly advance business," adding, "I believe this helped raise Kakao's stock price."

When asked if Kakao plans to continue listing its subsidiaries, he replied, "Since some companies have already received investments, some IPOs will proceed, and companies not targeting global markets will be reorganized."

Regarding criticism that Kakao is only strengthening its domestic market dominance rather than expanding overseas, Chairman Kim said, "Kakao only started making profits 2-3 years ago. Before that, it was a company we worried might not survive, so we also feel some bewilderment about how the company has become what it is today," adding, "Global expansion is our dream and the challenge of all employees, so we are working hard on it now."