[Exclusive] Kakao Junshinwi Opposes Appointment of Executive Amid 'Muk-Twi Controversy'

Kakao Appoints CTO Amid Stock Option Controversy
Clashes with Public Sentiment and Opinion
Preliminary Committee to Hold Meeting Soon to Raise Issues

Kakao's external oversight body, the 'Compliance and Trust Committee,' is set to raise concerns regarding the appointment of the Chief Technology Officer (CTO) of Kakao Bank, who is involved in the 'Muk-twi' controversy. Guidelines are expected to be issued concerning executive appointments that do not align with societal expectations.

According to the IT industry on the 5th, the Kakao Compliance and Trust Committee will soon hold a meeting to address issues related to the CTO appointment amid the 'stock option controversy.'

A source familiar with the committee's affairs stated, "From the management's perspective, there may be no problem and sufficient explanations can be provided, but there are areas lacking consideration," adding, "Considering public sentiment and opinion, any wrongdoing must be pointed out."

Jeong Gyudon, former CTO of KakaoBank
[Photo by KakaoBank]

Jeong Shin-ah, the appointed CEO of Kakao, recently introduced former Kakao Bank CTO Jeong Gyu-don as Kakao's next CTO during online and offline meetings with employees.

The problem lies in the fact that the appointed CTO was the main figure in the Muk-twi incident. He sold 106,000 of his 117,234 shares (at 61,336 KRW per share) just three trading days after Kakao Bank's listing on August 10, 2021, earning approximately 6.6 billion KRW in profits. Two weeks later, on August 24, he sold the remaining 11,234 shares (at 91,636 KRW per share), securing an additional 1 billion KRW.

This, along with the approximately 90 billion KRW profit realized by former Kakao Pay CEO Ryu Young-jun and other Kakao Pay executives in the same year, sparked the Muk-twi controversy. Following the executives' massive stock sales, the stock price dropped, causing significant losses to ordinary shareholders and drawing criticism. The executives' stock Muk-twi and moral hazard led to a decline in trust toward the company.

Kakao, which vowed to accelerate management reform, is once again facing criticism both internally and externally. This is because the company appointed the very person at the center of the Muk-twi controversy, the starting point of the crisis, to a key executive position amid the company's greatest crisis since its founding due to various issues. Moreover, the fact that the appointed CEO introduced the CTO candidate in his capacity as head of the Kakao Reform Task Force (TF) raises doubts about the sincerity of the reform efforts.

This also contradicts the strong reform demands made by the Compliance and Trust Committee. On the 20th, the committee presented responsible management, ethical leadership, and social trust restoration as key agendas to Kakao and five other affiliated companies. It also required the affiliated companies to establish improvement plans based on these agendas and report within three months. At that time, the committee stated, "The decline in trust in the Kakao Group is the responsibility of the management," and recommended, "In line with the launch of new leadership, establish a code of conduct that includes values, fairness, communication, and responsibility."

Dissatisfaction is also detected internally. Concerns are emerging that Kakao, which promised to renew its organization and management style centered on founder Kim Beom-su, is reverting to 'revolving door personnel.' According to the Kakao labor union Crew Union, a recent survey of about 600 union members showed that the most unacceptable executive behaviors included "pursuit of private interests that maximize executive compensation over company growth" and "opaque and unprincipled revolving door personnel appointments."