The emergency press conference by ADOR CEO Min Hee-jin on the 25th was hotter than the recent general election. The internal strife of a company representing Korea's entertainment industry is being laid bare day after day. HYBE (CEO Park Ji-won)—ADOR's parent company and standing at the opposite pole of the confrontation—is a KOSPI-listed company. Besides HYBE, it is true that SM, JYP, and YG, which also represent Korea, are listed companies, but all three are listed on KOSDAQ. KOSPI requires more demanding listing criteria than KOSDAQ in terms of scale and revenue. By that much, HYBE's revenue, market capitalization, and social influence are ahead of the other entertainment companies.
Being a listed company also means being subject to mandatory ESG disclosure. In Korea, the exact standards and subjects have not yet been legislated, but HYBE—which met the large-business-group criteria last year—is highly likely to become subject to mandatory disclosure under the strictest standards. Just as many listed companies have voluntarily published sustainability-management reports as a kind of rehearsal for mandatory disclosure, all of the three companies—SM, JYP, and YG—and HYBE published sustainability-management reports last year. Things such as "transparent and professional board operation," "eco-friendly performance and employment diversity," "enhancing shareholder value," and "risk prevention such as financial management" were mentioned in their sustainability-management reports.
[The cover of HYBE's 2022 sustainability-management report ©HYBE]
The ADOR Situation Is Directly Linked to Corporate Governance
CEO Min Hee-jin began the press conference with the story that HYBE had blocked NewJeans's promotion. Within HYBE, various labels and artists exist. Mutual competition is naturally inevitable, and competition itself is not the problem. Not only in the entertainment industry but companies in any industry hold various product lines and gain market competitiveness through competition and collaboration. However, CEO Min Hee-jin claims that, in the process of competition, the decision-making process of HYBE's board was not fair. Conversely, HYBE claimed that CEO Min Hee-jin tried to lower ADOR's value and illegally increase her stake; if true, CEO Min Hee-jin would have betrayed not only shareholder value but also the expectations and trust of ADOR's executives and staff.
HYBE, Which Had Pondered the Sustainability of the Entertainment Industry
On the cover of HYBE's 2022 sustainability-management report, the phrase "For Sustainable Entertainment" is written. And three pages later, HYBE Chairman Bang Si-hyuk opens the report, saying, "We will ponder the sustainability of the entertainment industry ahead of others and become a company that contributes to society and grows through its core business." He also promises to make HYBE a long-loved company, a company that brings about positive change in the industry. If it goes as promised, the conflict between HYBE and ADOR should, as a result, also be able to remain a positive influence on the industry. It could be an opportunity for the entertainment industry to break away from long-standing practices and transform into an industry based on good governance—that is, a fair system.
The Homework of an Entertainment Industry of Growing Influence
The word "fandom" long ago changed to "fandustry." As the concerts of Taylor Swift, a pop singer representing the U.S., moved entire regional economies, terms such as "Swiftonomics" and "Touronomics" came into being. HYBE, too, has a plan to provide artist-linked attractions, food, and lodging products through "The City" project, which turns entire cities where concerts are held into theme parks. It appears it will contribute considerably not only to local governments but also to the national economy.
As performance and influence have grown, the scale of shareholders in the entertainment industry is also increasing together. That means interest in companies' operations is rising by that much. This is all the more so because it is an industry on which people's attention is concentrated. This situation reminds us that organizational satisfaction stemming from governance can be important from a risk-management standpoint.
by Editor N