Corporate Governance Under Scrutiny
In a recent financial earnings conference call, Naver CEO Choi Soo-yeon addressed the Japanese government’s call for a restructuring of the partnership between Naver and SoftBank over the Line mobile messenger app. Naver, a leading Korean IT company, has found itself in an unprecedented situation after Japan’s administrative guidance suggested LY Corp., the Tokyo-based operator of Line, to reconsider its financial ties with Naver. This development follows a significant data breach last November that exposed Line users’ personal information through Naver’s cloud server.
Choi remarked, “It is very unusual for an administrative guidance to ask for readjustments to a shareholding structure.” She further explained that Naver’s decision-making in this regard would be informed by its broader business strategy rather than a direct response to the guidance, indicating that deliberations on the matter are ongoing.
Amplifying the serious tone of the situation, the CEO disclosed ongoing discussions with the Korean government, which, along with Korea’s ICT and foreign ministries and the presidential office, has pledged cooperation to address the guidance issued by Japan.
Choi conveyed gratitude towards the Korean government for its support during this period of uncertainty. She acknowledged that the guidance could lead to a realignment of Naver’s business, particularly in its infrastructure segment, due to the potential separation of Naver and Line networks.
The Korean political sphere has shown bipartisan disapproval of Japan’s guidance. Both the ruling People Power Party and the main opposition Democratic Party of Korea have criticized the move as excessive and discriminatory. The former highlighted the absence of misuse of Japanese users’ data by Naver, while the latter accused Japan of showing preferential treatment towards its domestic firms that have also experienced information leaks.
In response to the growing tension, the Japanese Ministry of Internal Affairs and Communication clarified that its guidance is non-binding. Meanwhile, reports have surfaced that SoftBank is in negotiations with Naver to purchase a portion of its 50 percent stake in A Holdings, the joint venture that owns a majority of LY Corp. This joint venture was established in 2019 to bring Line and Yahoo! Japan under a unified management, with Naver and SoftBank at the helm of each entity respectively.
As the situation unfolds, Naver’s CEO assures that the company will communicate its official stance once a comprehensive plan is in place, signaling a strategic approach to the complex issue at hand.
