Kakao, who promised SM Entertainment independence following the acquisition, decided to kick out a large number of the label's executives for THIS reason.

On January 28, the Korean media outlet Korea Economic confirmed that after 10 months since Kakao acquired SM, it has decided to change the latter's management.

What "shady" things did the management do to be kicked out? Is it related to Lee Soo Man's termination?

Kakao Fires SM Executives Due to 'Shady' Investment Made Without Former's Consent

In particular, the current management team including CEO Jang Cheol Hyuk and A&R Officer (CAO) Lee Sung Soo, former SM's CEO who's also the nephew of founder Lee Soo Man, as well as Chief Operating Officer Tak Young Joon and Chief Executive Officer Park Jun Young, will be replaced.

These key personalities were also the same people who worked with Align Partners to oust SM's founder, former CEO and general producer Lee Soo Man before establishing "SM 3.0," with a self-proclaimed advanced management, transparent governance and better idol training system.

Initially, Kakao promised the label to let them work independently and not as a subsidiary, but eventually, the management was dismissed for engaging in "shady" management activities.

ALSO READ: What are the Reasons HYBE, Kakao, and CJ Want to Acquire SM Entertainment? Lee Soo Man Trends Amid Acquisition Battle

Accordingly, SM executives made dubious investments in a private company of its close aides without the consent of its parent company, only to be caught in the foot.

Kakao is said to have concluded that the company should not be left alone after conducting a forensic investigation into the current management.

Earlier in January this year, Kakao launched the forensic audit in accordance with Article 21 of the External Audit Act (of Stock Companies) through the Kim & Chang law firm.

During the audit and investigation, the parent company found several other problems aside from serious M&A and dubious investment issues.

Kakao has since then decided to put SM Entertainment's management on the operating table after judging that it needs control, or else, they will also be affected by the financial statements linked to the headquarters in the process of amortization or loss.

Worse, they will be criminally punished for breach of trust and other charges for neglecting or knowingly condoning such acts.

SM Entertainment's Performance Decreases Over Time Due to Management's Silence

Another criticism that arose in light of the current SM executives being kicked out was their lack of pro-activeness which led to the departure of numerous executives, staff, employees and artists under the company.

Employees who joined the company saying they would contribute to the changes SM Entertainment has put forward are leaving the company one after another, disappointed with the existing management.

In fact, SHINee Taemin once complained and exposed the status of the label through a live broadcast, saying:

"The treatment of employees is not improving."

Thus, SM artists including Super Junior Kyuhyun, Donghae, Eunhyuk as well as EXO D.O., Baekhyun, Chen and Xiumin whose contracts expired decided to stand alone instead of renewing their contracts.

READ MORE: Leaked Email Exposes 'Infighting' Between Lee Soo Man, Artists, SM CEOs & Staff

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Written by Eunice Dawson.