A long-running saga playing out in the K-pop business in South Korea has taken its latest dramatic turn in a Seoul court.
Min Hee-jin, the CEO of HYBE-owned record label Ador, will stay on as CEO of the company after The Seoul Central District Court effectively blocked the exec’s dismissal by HYBE.
As reported by local media outlet Yonhap News Agency, The Seoul Central District Court granted an injunction on Thursday (May 30) preventing K-pop giant HYBE from voting at an Ador shareholders meeting on Friday (May 31) aiming to remove her and other execs at the subsdiary.
HYBE owns a majority (80%) stake in Ador, which means that Min Hee-jin’s dismissal would have been likely had it been allowed to exercise its voting rights.
The remaining 20% of the company is owned by Min Hee-jin, who holds an 18% stake, while other Ador execs own 2%.
The drama started last month when HYBE revealed that it was launching an audit of Ador CEO Min Hee-jin and several other Ador executives over an alleged attempt to seize control of the K-pop sub-label from HYBE, the company behind K-Pop stars like BTS.
“HYBE invoked its right to audit CEO Min Hee-jin and top executives of the company’s affiliate label ADOR, as well as called them to summon a shareholder meeting on April 22,” a HYBE spokesperson told MBW at the time.
Min Hee-jin argued in her application for an injunction to block HYBE from voting at Ador’s shareholder meeting that her contract with the company included a clause protecting her position as CEO for five years.
As per Korea Joongang Daily, the clause stated: “HYBE must exercise its voting rights at Ador’s shareholders’ meetings to maintain Min’s positions as CEO and inside director of ADOR for five years from the establishment of ADOR on Nov. 2, 2021.”
According to Korea Joongang Daily’s report, the court ruled on Thursday that “HYBE’s alleged grounds for Min’s dismissal or resignation have not been sufficiently provided”.
The court conceded, however, that “It is clear that Min Hee-jin sought ways to either remove NewJeans from HYBE’s control or pressure HYBE to sell its stake in ADOR” but that “it is difficult to conclude that these attempts went beyond just seeking methods to concrete actions”.
Min Hee-jin’s actions “could be seen as a betrayal against HYBE”, but “do not necessarily constitute a breach of trust” the court is cited by Korea Joongang Daily as concluding.
In a short statement issued to local media, HYBE said that it “plans to proceed with procedures within the boundaries set by the law, as clearly stated by the court’s decision”.
HYBE will have to pay a fine of 20 billion South Korea won ($14.5 million) to Min Hee-jin if it breaches the ruling.
Meanwhile, Yonhap reports that three HYBE executives have now been placed on the board of Ador following the shareholder meeting and following the dismissal of two execs who were close Min Hee-jin allies (identified only as Shin and Kim).
Citing sources, Yonhap reports that the new Ador board members from HYBE include the latter company’s Chief Human Resources Officer Kim Ju-young, Chief Strategy Officer Lee Jae-sang and Chief Financial Officer Lee Kyung-jun.
Min Hee-jin and her lawyers addressed local media at press conference in Seoul on Friday. As reported by Korea Joongang Daily, one of the exec’s lawyers, Timothy SK Lee, suggested that Ador’s board could still attempt to oust the exec.
“What we’re worried about is that the board was formed in a way such that there is a possibility that Min could be fired,” he said.
“But legally, the injunction was passed so that HYBE cannot exercise its rights. It’s a precarious position, so because the injunction was approved, can she maintain her position as the CEO?
“Since a cluster of HYBE’s executives were hired as inside directors, there is a way that the board could be summoned to fire Min, but the new directors haven’t passed that motion yet.”
HYBE’s share price took a big hit when news first broke of the conflict between the company and ADOR CEO Min Hee-jin.
The stock fell by nearly 8% on Monday April 22, to 212,500 South Korea won (roughly USD $154), the day that news spread around the world that HYBE had launched an audit of ADOR’s CEO and several other executives at ADOR, on suspicion that they had been plotting to sever the company from HYBE.
By Friday, April 26, the stock had dropped 12.6% on the week, closing at 201,500 South Korea won. In all, that wiped about 1.06 trillion South Korea won ($770 million) off of HYBE’s market cap.
HYBE’s shares fell 2% on Friday to 200,000 South Korea won (approx. $145.32).
HYBE’s revenue for Q1 2024 came in at 360.92 billion South Korea won (USD $271.57 million at the average exchange rate for Q1), a 12.1 YoY drop, according to the company’s latest earnings report, released on May 2.Music Business Worldwide
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