Among South Korea’s big four entertainment companies, HYBE and YG Entertainment have received failing grades from domestic environmental, social, and governance (ESG) rating agencies.
Despite publishing the ‘2023 Sustainability Report’ last year to highlight their sustainability efforts, these entertainment companies have been criticized for lacking governance, including board independence.
HYBE and YG Entertainment each received a C (weak) rating from the Korea Institute of Corporate Governance and Sustainability (KCGS) on July 16. Both companies scored B and B+ in the environmental category, indicating average to good performance, and B+ and A in the social category, respectively. However, they received low grades in governance, with HYBE scoring a C and YG receiving a D.
SM Entertainment and JYP Entertainment each received ESG ratings of B+. Both companies also performed well in the environmental and social categories, scoring A or A+ grades.
The KCGS corporate governance ratings are based on a company’s ESG management activities, including internal systems and regulations to minimize risks. Companies are scored according to the presence of audit organizations and other internal controls, with points deducted for any negative events, incidents, or legal or administrative sanctions involving ESG risks.
Industry insiders speculate that HYBE’s low score in the standard assessment and YG’s poor performance in the in-depth evaluation contributed to their poor overall ratings. In the case of SM, a management dispute during the assessment period negatively impacted the company’s governance score despite the company’s generally solid corporate governance framework.
