Kim Beom-su Granted Full Authority Over Oversight Body Chief... Group Control Tower Also Within Reach

Former Supreme Court Justice Kim So-young Begins Drafting Regulations for Oversight Bodies
Personnel Reshuffle Possible Up to Group Control Tower Including Subsidiary CEOs
Founder Kim Beom-su to Lead Management Innovation Committee... Frontline of Crisis Management

Kim Beom-su, founder of Kakao and head of the Future Initiative Center, has effectively granted Kim So-young, the inaugural head of the external oversight body and former Supreme Court justice, full authority over the operation of the oversight organization. He entrusted Kim, the former justice, with the task of establishing the operational regulations that define the roles and powers of the oversight body. There is widespread criticism that the all-encompassing risks facing Kakao were triggered by the 'revolving door personnel' phenomenon, leading to expectations that not only the CEOs of subsidiaries but also the group’s control tower will be held accountable.

On the 6th, former Justice Kim began working on drafting the operational regulations for the Kakao Compliance and Trust Committee. On the 3rd, Kakao appointed Kim as the chairperson of this external body tasked with overseeing the group’s compliance and ethical management. A Kakao official stated, "(Since the committee is) an organization guaranteed 100% autonomy and independence, the chairperson is preparing the operational regulations." Although the committee has not yet officially launched, the chairperson has been entrusted with outlining the committee’s blueprint to put Kakao’s management system under scrutiny.

So-Young Kim, Chairperson of Kakao's 'Compliance and Trust Committee'
[Photo by Kim & Chang Law Office]

It is reported that Center Head Kim personally oversees related tasks, including proposing the idea to establish the committee and appointing Chairperson Kim. Chairperson Kim also stated, "After hearing Center Head Kim’s determination to recognize the committee’s independent authority, including investigations and reviews of past issues, and to provide full company-wide support, I accepted the chairperson position." On the same day, Center Head Kim shared details about the establishment and operation of the committee at the second community management meeting attended by CEOs of major subsidiaries. Key Kakao stakeholders will also participate in the committee’s activities.

The committee plans to identify major risk factors within Kakao’s subsidiaries. It will have investigative and supervisory authority over issues recently raised, such as excessive listings, market monopolization, harm to user interests, and violations of compliance obligations by top executives. It will also serve as an executive body to overhaul the compliance monitoring and internal control systems of individual affiliates. If necessary, it means scrutinizing even trade secrets of each company to excise problematic areas.

Industry insiders expect the personnel system to be the first target of reform. This is because many point out that the various problems Kakao currently faces were triggered by the so-called 'Kim Beom-su faction’s' revolving door personnel. Most CEOs of Kakao and its subsidiaries are figures who have shared hardships with Center Head Kim. Although their independent management approach led to a survival-of-the-fittest scenario causing friction, the control tower’s influence to regulate them was insufficient. A former Kakao executive noted, "The reason for this crisis is that the executives regarded each other as brothers and missed the opportunity to bring about change through external recruitment like Naver."

There is talk of a large-scale overhaul of Kakao’s management. More than half of the 77 subsidiary representatives’ terms will expire around March to April next year. This includes major subsidiaries such as Kakao, Kakao Entertainment, Kakao Mobility, and Kakao Games. Center Head Kim said, "I reflect on my own shortcomings first," adding, "I will respect the committee’s decisions and hold accountable those subsidiaries that do not comply."

The group’s control tower, the CA Council, is also not free from scrutiny. The CA Council consists of seven members: Center Head Kim, Hong Eun-taek, CEO of Kakao, Song Ji-ho, CEO of Crust Universe, Kim Jung-ho, chairman of Brian Impact Foundation, Bae Jae-hyun, head of Kakao Investments, Jeong Shin-ah, CEO of Kakao Ventures, and Kwon Dae-yeol, head of Kakao Policy Center. Most of these individuals have had ties with Center Head Kim since the early days of the company or have jointly nurtured Kakao’s growth model. Moreover, CEO Bae is currently detained on allegations of market manipulation during the acquisition of SM Entertainment. Crust Universe, led by CEO Song, is under prosecution investigation for allegedly illicitly profiting from the Kakao subsidiary-created Klay coin. CEO Song is the architect of Kakao’s growth model, which involves various business ventures targeting platform users, subsidiary independence, and large-scale investment attraction premised on initial public offerings (IPOs). Given the controversies involving close associates and legal risks within the CA Council, there is speculation about possible restructuring.

Meanwhile, through the second community meeting, Center Head Kim announced the launch of a Management Innovation Committee to lead the group’s transformation and will personally serve as its chairperson. The Management Innovation Committee will spearhead change and innovation across the entire Kakao community until the current crisis is overcome. This marks a shift as Kim, previously known as a 'reclusive manager,' has stepped to the forefront of crisis management. Kim stated, "Until now, I have respected the autonomy and responsible management of each community by honoring their authority, but as the founder and major shareholder, I will return to the founding spirit and take the lead in overcoming this crisis with full responsibility," adding, "To this end, I will meet and communicate directly with stakeholders across various fields, actively engaging on the ground."