LY votes for an all-Japanese board

2024.05.09 11:44:39

[Photo by Han Joo-hyung]이미지 확대

[Photo by Han Joo-hyung]

LY Corp., who operates messaging app LINE, held a board meeting on Wednesday and passed a resolution to remove Shin Jung-ho, the company’s chief product officer (CPO), from the board, to strengthen its “security governance.” But the move’s aim is viewed as an enhancement of external oversight by replacing Shin with an external director.

Information technology (IT) industry observers believe that the departure of Shin, t who was the sole Korean board member at LY, a joint venture between South Korean tech giant Naver Corp. and Japan’s SoftBank Group Corp., will significantly reduce Korea‘s influence at LY, including its development leadership.

On Wednesday, LY’s board of directors decided to remove both Shin and Chief Strategy Officer (CSO) Taku Oketani from the board and appoint an external director to fill the vacancy. The new board is expected to start its activities after a separate shareholders‘ meeting scheduled for June 18th, 2024.

LY has maintained a troika system with three representative directors: Chairman Kentaro Kawabe; Chief Executive Officer Takeshi Idezawa; and CPO Shin. But with Shin’s departure, it is likely that the two Japanese executives and internal directors will effectively wield full authority.

“To improve and strengthen our security governance, the board decided to increase the number of external directors and create a more independent management system,” Idezawa, the CEO, said during an earnings call on the same day.

“Please do not see this change as a dismissal,” he added. “We discussed increasing the number of external directors with our major shareholders to enhance our security governance, and in that context, Shin has stepped down from the board but will continue his role as CPO.”

Technically, Shin’s departure is regarded as a disciplinary move following an incident in November 2023 that compromised about 520,000 pieces of personal data. But market observers see it as a signal that “erasing Korea” has begun across all of Naver’s businesses in Japan, including Japan‘s national messenger LINE.

[Graphics by Song Ji-yoon and Yoon Yeon-hae]이미지 확대

[Graphics by Song Ji-yoon and Yoon Yeon-hae]

Shin has played a significant role in overseeing business operations since Naver launched its search service business in Japan in 2008 and has led LINE’s development to where it is today. He is also often referred to as the “father of LINE,” and his influence within LY is so strong that his name has come up whenever any nationality controversies surrounding LINE arose. This is why LY’s decision to have an all-Japanese board is interpreted as a strategy to make LY a Japanese company.

Shin‘s decision in late March 2024 to give up 30 million shares of stock options granted in two batches in March and October 2021 is also seen as related to this development as it is believed that he made the decision to address growing anti-Naver sentiment in Japan.

In response to the massive leakage of personal information, LY resolved in its board meeting to prohibit the granting of stock options.

“There has been even talk in Japan about Shin to the extent that LY is making money in Japan and giving it to a Korean. He was an uncomfortable presence for the company,” a source familiar with Naver’s situation said. “Shin‘s departure from the board also seems to be a measure taken by LY under the guidance of the Japanese government.”

LY, founded in 2021, is a 50-50 joint venture between Naver and SoftBank that is operated by parent company A Holdings Corp.

In particular, LINE is considered a ’national infrastructure-level platform‘ that is used by most Japanese, with a monthly active user base of 96 million in Japan as of December 2023.

By Lee Sang-duk, Ko Min-suh, Hwang Soon-min, and Yoon Yeon-hae

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