Kakao to create compliance system amid stock manipulation controversy

[Photo by Yonhap]

Kim Beom-su, founder and head of Future Initiative Center of South Korean platform giant Kakao Corp., vowed Monday to establish a compliance body to strengthen internal controls in the wake of allegations over market manipulation in acquiring SM Entertainment Co.

“Following the recent incidents, I came to think that I should take the lead in reflecting on our shortcomings and prepare a stronger internal, external system for compliance management and control,” Kim said on Monday, in a meeting with more than 20 chief executive officers of Kakao and its major affiliates, including Kakao CEO Hong Eun-taek. “We need to think and practice as a community about what we should do now.”

Kim’s remarks suggest that Kakao’s management culture will take a shift from autonomy to centralization.

While the company has been successful in increasing its size through aggressive business expansion, it has been under scrutiny for its weak internal control system with a number of businesses in disarray and executives’ moral hazard being prevalent.

“The management saw that the current situation requires the highest level of contingency management and discussed the direction for changes to overhaul Kakao’s management system,” the company said. “We intensively investigated the causes of the recent problems and even discussed plans for accepting external control to ensure compliance.”

This includes receiving external assessments of social impact when conducting new businesses or large-scale investments, the company added.

Kakao plans to hold a management meeting with its affiliates every Monday to review specific action plans going forward.

“As the founder has shown strong commitment, it is likely that Kakao’s management culture will change significantly,” an official from the information technology industry said.