Weekly ESG Controversies (July 22~28)

Key Takeaways

• Kim Beom-soo's Arrest and Heightened Judicial Risks for KAKAO

  • KAKAO's judicial risks have surged, particularly concerning allegations of 'SM stock price manipulation,' leading to Kakao topping all risk categories this week—'Competitive Behavior (38.78%),' 'Business Ethics (10.68%),' and 'Systemic Risk Management (9.18%)'—making it the most controversial issue of the week.

  • In the worst-case scenario, concerns have been raised about the potential change in Kakao Bank's major shareholder due to KAKAO's shareholder qualifications, which could delay approvals for new financial businesses under the Kakao brand and raise worries about governance and business continuity.

  
  

• Ongoing Stock Manipulation Allegations

  • Following DEUTSCH MOTORS, SAMBU CONSTRUCTION has also come under scrutiny, with allegations of stock manipulation involving high-ranking politicians being discussed in the Financial Services Commission's hearings.

• TMON and WEMAKEPRICE Payment Settlement Delays

  • Due to payment settlement delays at TMON and WEMAKEPRICE, sellers in sectors such as travel, food and beverage, and apparel have temporarily suspended sales, causing harm to both sellers and consumers and raising concerns about liquidity crises.

• Supreme Court Ruling on 'Employees' under the Labor Standards Act

  • The Supreme Court has ruled that drivers of 'TADA' under SOCAR qualify as employees under the Labor Standards Act. This decision is expected to influence other lawsuits filed by platform workers.

1. Competitive Behavior (38.78%)

• Following the arrest of Kakao's Kim Beom-soo for 'SM stock price manipulation,' concerns are also being raised about the potential loss of Kakao Bank's major shareholder qualification.

2.  Business Ethics (10.68%)

• KAKAO, DEUTSCH MOTORS, and SAMBU CONSTRUCTION have all faced controversy due to allegations of stock price manipulation.

• HD HYUNDAI HEAVY INDUSTRIES is under scrutiny for allegedly bribing a former head of the Defense Acquisition Program Administration concerning the basic design bid for the next-generation Korean Destroyer (KDDX) project.

3. Systemic Risk Management (9.18%)

• The arrest of Kakao founder Kim Beom-soo has raised concerns about the business continuity of both Kakao and Kakao Bank.

• In response to the payment settlement delays by TMON and WEMAKEPRICE, major travel agencies such as HANATOUR and YELLOW BALLOON TOUR have temporarily suspended the sale of travel products on these platforms.

4. Labor Practices (7.18%)

• The Supreme Court has ruled that SOCAR's 'TADA' drivers qualify as employees under the Labor Standards Act.

• At Samsung Electronics, conflicts between labor unions have reignited following a general strike by the union.

5. Materials Sourcing & Efficiency (4.61%)

• In the face of an uncertain and volatile global economy, falling prices of key raw materials such as lithium and metals have posed operational and profitability challenges for POSCO FUTURE M and LG ENERGY SOLUTION.

In this week’s ESG report, we observed a significant surge in risks related to Kakao, alongside several newly identified issues. Firstly, the risk associated with Kakao's 'SM stock manipulation' allegations has spiked once again due to the arrest of Kim Beom-su. This risk is now the most prominent not only in terms of 'competitive conduct' but also in 'business ethics' and 'systematic risk management.' This demonstrates how a single major risk can escalate uncontrollably and intertwine with multiple complex risks, highlighting the interconnected nature of risk categories.

Additionally, new risks have emerged from the TMON-WE MEP dispute, the Supreme Court's ruling on SOCAR's 'Labor Standards Act employee status,' and the uncertainty surrounding global economic conditions affecting 'Materials Sourcing & Efficiency.' It will be crucial to closely monitor how these risks evolve and are managed, and to observe which companies are exposed to these risks or are taking proactive measures.

Disclaimer: This content was made with the help of AI. It may contain errors or inaccuracies, and should not be relied upon as a substitute for professional advice. The information contained in this article is not investment advice. FairLabs does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.

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