A prominent South Korean billionaire and technology leader, Kim Beom-su, founder of Kakao, was arrested on Tuesday for allegedly engaging in stock price manipulation involving SM Entertainment, a major K-pop agency, during a deal last year.
While Kim has yet to face formal charges, the Seoul Southern District Court issued an arrest warrant out of concerns that he may attempt to flee the country or destroy evidence. He has publicly denied the allegations, stating in a recent staff meeting at Kakao, “The allegations are not true. I have never instructed or condoned any illegal acts.” The company expressed that the circumstances surrounding his arrest are “unfortunate.”
Kim, aged 58, is accused of manipulating stock related to SM Entertainment to obstruct a takeover by another K-pop powerhouse, Hybe, which manages well-known groups including BTS. Eventually, Kakao acquired SM Entertainment itself. Notably, Kakao’s chief investment officer, Bae Jae-hyun, was also indicted last year on similar stock manipulation charges.
Kakao, which employs over 10,000 people as of 2020 and boasts a substantial 24% ownership stake held by Kim, saw a 5% decline in its stock price following the news of his arrest.
Expert opinion from Woochan Kim, a professor at Korea University Business School, indicates that the situation poses a significant challenge for Kakao, potentially marking its “biggest crisis.” He emphasized that it is now the responsibility of the remaining leaders at Kakao to demonstrate the company’s sustainability and operational effectiveness in the absence of its founder.
Despite these serious allegations, it is imperative to remember that the legal proceedings are ongoing, and the outcome remains uncertain. The situation may present an opportunity for Kakao to demonstrate resilience and adaptability, potentially leading to a stronger leadership structure and renewed focus on their core business objectives.
In summary, while Kim Beom-su’s arrest raises significant questions about corporate governance and ethics in South Korea’s thriving tech and entertainment sectors, it also underscores the pressing need for companies to have robust structures in place to navigate crises and maintain investor confidence.