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| HYBE headquarters in Yongsan District, Seoul / Yonhap |
By Lee Min-hyung
The tug-of-war between the nation's two top entertainment agencies ― HYBE and SM Entertainment ― to secure as many shareholders' voting rights as they can is escalating as the former attempts to take management control of the latter.
HYBE, which became the largest shareholder of SM on Feb. 22 by purchasing a 14.8-percent stake from the firm's founder Lee Soo-man, is requesting SM's minority shareholders to delegate their voting rights.
It is asking the shareholders to do so on two agenda items ― appointment of directors and changes of articles of association. The issues will be put to a vote during SM's regular shareholders' meeting slated for March 31.
"SM has so far served as a pioneer of Korea's entertainment industry and driven the global sensation of K-pop," HYBE said in a note to SM shareholders. "But now is the time for the company to achieve a major leap forward as a global entertainment company that can compete with the world's three major music labels."
The company went on to persuade them to stand on the side of HYBE for the management of SM.
"Building independent and transparent management tops the list for the company to realize exemplary governance structure," HYBE said in the statement. "We cannot trust SM's current top management and their willingness to abide by law remains questionable, as the company was mired in a series of controversies while buying back its own shares."
HYBE, most famous as the music label behind K-pop sensation BTS, recently became the largest shareholder of SM, after SM founder Lee partnered with HYBE to fight against SM's incumbent management. SM has now teamed up with Kakao, the operator of the nation's dominant mobile messenger app, KakaoTalk. Kakao is the second-largest shareholder of SM with a 9.05 percent stake.
Both sides are stepping up criticism against each other for the management right of SM ahead of the planned shareholders' meeting. Even if HYBE maintains its position as the largest shareholder, the company needs to win trust from minority shareholders whose stake in SM tops 60 percent.
HYBE recommended three candidates for SM's executive directors including HYBE America CEO Lee Jae-sang. For external directors, the company also recommended three candidates in the legal, academic and environmental sectors.
"All the candidates for the executive director positions have enough experience in the entertainment industry and are capable of handling various tasks across the industry," HYBE said. "They also played a crucial role in HYBE attaining a three-fold increase in sales for the past three years. We will also enhance our responsible management by improving the governance structure with the newly-formed board of directors."
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