Kakao to tighten grip over units, rethink horizontal culture

Kim Beom-soo, founder and chairman of South Korea’s largest mobile platform Kakao Corp., said on Monday it will abandon its autonomous management system and rethink horizontal corporate culture to reform the startup-turned-conglomerate.

He made the remarks in a town hall meeting with Kakao employees at its headquarters in Seongnam, near Seoul.

Kim admitted the mobile platform has reached the limits of its growth-oriented strategy, under which it motivated the top management of each subsidiary through stock options and empowerment to independently lead the company’s growth.

Kakao, the operator of the country’s dominant mobile messaging app KakaoTalk, has come under fire for its octopus-style business expansion, which led to a market monopoly and created a moral hazard for some top executives.

“We will reset our expansion-centered management strategy and focus on core businesses,” Kim told its employees.

“We need to review everything we have taken for granted, including (our policies on) the use of English names, information sharing and horizontal culture.”

Kakao employees are said to have adopted English names and call colleagues and managers with their English names without titles to promote a horizontal corporate culture.  

In his opening speech at the meeting, Kim used the word “new” nine times and said he would lead the reform to restore trust from stakeholders and the society at large. 

“I will work with the determination to even change our company name of Kakao and change the corporate culture,” he noted.

Founded in 2010, Kakao has grown exponentially to become South Korea’s 15th-largest business group in terms of assets. Its businesses range from entertainment to fintech, games and healthcare with 146 subsidiaries at home, including 10 listed ones, as of the end of June.

On Oct. 26, Bae Jae-hyun, chief investment officer of Kakao Corp. and two unidentified senior investment managers were arrested under investigation into the company's purchase of a majority stake in K-pop pioneer SM Entertainment Co. in February this year.

The three senior managers are alleged to have pushed SM’s share price above the tender offer price proposed by HYBE Co., the company behind the boy band BTS. Accordingly, HYBE failed to take control of SM.

The regulatory Financial Supervisory Service is also considering reporting Kakao Chairman Kim and its Chief Executive Hong Euntaek to prosecutors over alleged stock price manipulation in the purchase of SM.

Separately, the Korea Fair Trade Commission (KFTC) has launched an investigation into the commission charging system of Kakao Mobility Corp., a taxi-calling app.

Kakao was also criticized for creating moral hazard in relation to stock options paid to its top executives.

Namkoong Whon, a former CEO of Kakao Corp., exercised his stock options in the company for handsome profits upon his resignation as CEO in October this year to take responsibility for a days-long outage of Kakao’s messaging, payment and ride-hailing apps the same month.

His sale of the stocks at 50,000 won each outraged Kakao shareholders. He had promised to hold off on receiving incentives from the company until Kakao's share price reached 150,000 won.

Last week, Whon announced he set up an artificial intelligence-based entertainment company.

Write to Ji-Eun Jeong at jeong@hankyung.com
 


Yeonhee Kim edited this article.