Kakao's Kim Beom-su Released from Detention After Three Months... Tightening Management Reform Again

Kim Beom-su "Will Cooperate Fully with Investigation"
Challenges Include Subsidiary Restructuring and New Business Initiatives
Expected to Accelerate Reforms Upon Returning to Management

Kim Beom-su, chairman of Kakao's Management Innovation Committee, who was detained in court on suspicion of market manipulation during the acquisition process of SM Entertainment, has been released. Kakao, which faced the worst crisis of leadership absence due to Kim's detention, can now breathe a sigh of relief. With critical tasks such as affiliate restructuring and new business promotion piling up, Kim is expected to return to management and tighten the reins of reform.

On the 31st, after being released on bail from Seoul Southern Detention Center in Guro-gu, Seoul, Kim told reporters, "I will continue to cooperate sincerely with the investigation." He did not respond to questions about the timing of his return to management or his stance on the market manipulation charges.

Kim Beom-su, Chairman of Kakao Management Innovation Committee
Photo by Lee Jung-yoon

On the same day, the 15th Criminal Division of the Seoul Southern District Court (Chief Judge Yang Hwan-seung) granted Kim's bail request. This came three months after Kim was detained on July 23. Kim had applied for bail on the 10th, requesting to be tried without detention.

It is reported that Kim headed straight to his residence in Bundang. Although his future schedule has not yet been decided, he is expected to return to management soon. The entire group is at a critical crossroads due to the prolonged judicial risk. Since Kim had been leading the group's crisis management before his detention, his absence has created a significant gap. When submitting the bail petition, Kakao stated, "Kim's return to management is urgent."

Industry insiders expect Kim to accelerate the group's restructuring efforts. The number of Kakao's domestic affiliates decreased from 138 at the end of last year to 125 as of the end of June this year, a reduction of 13 in half a year. However, due to Kim's absence, decision-making has slowed, and the number has only decreased to 122. Recently, during the AI organization restructuring at the headquarters, Kakao spun off the AI-based chest X-ray image reading service into a separate corporation (CXR Lab) and decided to sell it. Besides this, streamlining management by selling non-core affiliates such as Kakao VX and consolidating overlapping businesses is an urgent task at the group level.

To this end, there is a possibility of convening a group council soon, attended by CEOs of major affiliates and the chairpersons of the CA Council, the group's control tower. On July 17, the day after the prosecution requested Kim's arrest warrant, he convened an emergency meeting and urged the group to carry out core tasks without disruption.

He is also expected to strengthen efforts in the AI new business sector, which recently announced its direction. From the 22nd, Kakao held a three-day developer conference, 'If Kakao 2024,' unveiling a new conversational AI service called 'Kanana.' Since concerns about the service's success and profitability are already emerging in the market, it is necessary to quell these worries and boost momentum.

Another challenge is to soothe internal members. According to the industry, Kakao's union membership rate recently surpassed 50%. Internal conflicts have ignited as the union demands the revival of remote work, while the management insists on the necessity of a core time system (focused working hours). Dissatisfaction among employees has grown over system reforms such as performance evaluations, leading to increased union membership. Additionally, after collective bargaining broke down in August, the Kakao union secured the right to strike and has announced a strike.

However, since trials of Kim and the management are ongoing, it may take considerable time to fully normalize management. As Kim was released on bail, there are also restrictions on his activities. A Kakao official said, "Kim's future schedule has not yet been decided."