Park Jae-hyuk is a seasoned journalist who has provided comprehensive coverage of South Korea's corporate dynamics, economic policies, industry challenges and the global positioning of Korean companies. Based on the articles he has written since joining The Korea Times in 2016, his investigative approach has helped readers understand corporate governance, economic trends and business strategies shaping South Korea’s economy.
Kakao still under fire from Yoon administration
Kakao's logo is seen on the wall of its office building in Seongnam, Gyeonggi Province, in this July file photo. Newsis
By Park Jae-hyuk
The Yoon Suk Yeol administration appears to be taking all possible measures to drive Kakao into a corner, raising questions about the intention behind the full-scale attack, according to industry officials, Thursday.
The IT giant was criticized by President Yoon, Wednesday, as an “immoral” company, after taxi drivers told the president that Kakao Mobility has charged excessive commissions by taking advantage of its dominance in the taxi-hailing sector.
Yoon made the remarks amid the investigations by financial and antitrust watchdogs into the mobility service provider, respectively for its alleged accounting fraud and abuse of market control.
In line with the government’s stance, the National Pension Service also changed the purpose of ownership of stakes in Kakao and Kakao Pay from “simple investing” to “general investing,” indicating the state pension fund’s possible intervention in their management.
Immediately after the direct criticism from the president, Kakao Mobility announced its plans to overhaul the commission system and meet with taxi drivers. This contrasted with its previous claim that investigations by financial and antitrust regulators are groundless.
“We acknowledge the various concerns that have been recently raised,” Kakao Mobility said in a press release, Wednesday.
Kakao also promised Monday that it will reform its corporate governance by forming an independent organization consisting of independent experts, who will monitor the company’s compliance management. The measure was taken as founder Kim Beom-su and other top executives have been at risk of arrest for alleged stock price manipulation.
The executives are suspected of intentionally inflating SM Entertainment’s stock price before Kakao’s acquisition in February, to prevent the top-tier K-pop agency from being sold to another bidder, HYBE, which is better known as the agency of BTS. Kakao Chief Investment Officer Bae Jae-hyun was arrested on this charge on Oct. 19.
Financial authorities also asked the prosecutors last week to indict the corporate body of Kakao. If the corporate body is handed a fine or heavier penalties, the company should renounce its status as the largest shareholder of the internet-only KakaoBank.
“Going through recent situations, I thought we should first reflect on what we did insufficiently and come up with a stronger system for ethics management and control both inside and outside the company,” the Kakao founder said.
Kakao has maintained a cautious stance on this, the biggest crisis since its foundation. But outsiders are arguing over the reason for the government measures.
There is speculation that the government is trying to curb Kakao’s growth, regarding it as a beneficiary of the previous Moon Jae-in administration's policies. Kakao grew rapidly under Moon’s presidency, expanding its presence thanks to the boom in the mobile platform industry.
Last month, the ruling People Power Party branded Kakao-owned search portal Daum as a left-wing website, citing an online poll on the portal, which showed that an overwhelmingly large number of fans were cheering for China via the portal, during the Hangzhou Asian Games’ men’s football match between Korea and China.
Kakao founder Kim Beom-su apologizes for service disruptions caused by a fire at the company's data center, during a parliamentary audit at the National Assembly in Seoul, in this October 2022 file photo. Korea Times file
In contrast, some market experts pointed out that the government measures resulted from Kakao’s reckless expansion and lax risk management.
Even before a series of recent investigations, minority shareholders criticized Kakao executives, who dragged down stock prices sharply by exercising their stock options after spinning off the company. Its lack of backup system also caused serious service disruptions in October last year, when a fire broke out at its data center in Seongnam, Gyeonggi Province.
“Kakao’s recent problems were caused by its impatience,” said Hwang Yon-sik, professor of Sejong University’s School of Business. “Its hasty decisions led it to be engaged in too broad range of sectors, and as a result, the company lost trust.”