South Korea’s leading entertainment agency HYBE’s record label Ador will hold an extraordinary shareholders meeting on May 31 to decide whether to dismiss Ador CEO Min Hee-jin. Min, who created the K-pop girl group NewJeans, has been embroiled in a dispute with parent company HYBE over management control.
HYBE aims to dismiss Min through this shareholders’ meeting and normalize Ador’s management. Min has filed an injunction to prevent HYBE from exercising its voting rights.
HYBE’s multi-label system, the first in the Korean entertainment industry, has been put to the test in the wake of the so-called “Min Hee-jin drama.” Chairman Bang Si-hyuk, who sought to grow the domestic entertainment sector through the multi-label system, is clashing with Min, who argues that the current label system only produces “NewJeans knockoffs.”
But since HYBE owns at least 75% to 100% of the shares in its major music label subsidiaries, and Chairman Bang controls HYBE with a 31.57% stake, that leaves no one or any method to effectively check his leadership.
HYBE has 65 subsidiaries, including Big Hit Music (100%), the label behind the K-pop phenomenon BTS. Other subsidiaries include Ador (80%), Pledis (85%), which manages boy group Seventeen, Source Music (80%), which manages girl group Le Sserafim, and BELIFT LAB (100%), which manages boy group Enhypen girl group Illit.
The entertainment giant also has non-music subsidiaries, such as the fandom platform Weverse (55.5%), mobile game developer HYBE IM (85%), and artificial intelligence (AI) voice synthesis company Supertone (56.1%).
HYBE established this governance structure in 2020, the same year it was listed on the stock market. The company rapidly expanded by acquiring domestic and international labels before and after its listing. HYBE also announced its intention to evolve into a platform company by branching into games, AI, and other sectors.
The idea was to nurture artists who would become “super intellectual properties (IPs)” through competition among the labels and then monetize them by extending them into performances, content, games, and more. Weverse was also part of this IP utilization business. For HYBE, the multi-label system helps distribute the risk of any single label’s failure. This structure allows for the reproduction of successful IPs, thereby sustaining revenue growth.
This governance structure is the brainchild of HYBE CEO Park Ji-won, who previously served as CEO of Korea’s largest gaming company, Nexon. Park took the helm of HYBE after Chairman Bang stepped down as CEO in July 2021. The gaming industry also employs a similar structure, organizing game developers into multi-studio systems.
Under the multi-label system, Park gave each label independence and autonomy to foster artists while the parent company, HYBE, provided operational support. The company explained that this is the most advanced structure adopted by major global music companies such as Universal Music Group (UMG) and Sony Music. Due to this governance structure, HYBE became a major conglomerate, with total assets amounting to 5.3456 trillion won ($3.9 billion) last year. Revenue reached 2.178 trillion won, and operating income was 295.6 billion won during the same period.
But the recent conflict with Min Hee-jin demonstrates that the labels’ independent management and associated rewards are not immune from HYBE’s control, particularly that of its largest shareholder, Chairman Bang. HYBE acquired Source Music in 2019 as part of its business diversification strategy, and Ador was established in November 2021 when the label business division of Source Music was spun off.
As of the end of March, Chairman Bang was HYBE’s largest shareholder, with a 31.57% stake. He is followed by Netmarble (9.44%) and Dunamu (5.53%). Scooter Braun, CEO of HYBE-America, holds a 0.87% stake, while Min Hee-jin and Pledis CEO Lee Da Hye each have a 0.01% stake, respectively. This structure makes it difficult for executives of subsidiary companies to oppose Chairman Bang’s management guidelines.
“The current governance structure focuses more on competition than synergy between labels, which may have led to complaints that rewards for NewJeans’ performance and success were insufficient,” said Cho Myung-Hyun, a professor at Korea University Business School and former head of the Korea Institute of Corporate Governance and Sustainability. “Given that similar incidents could happen in the future, HYBE needs to improve its incentive system and performance allocation agreements.”
