On March 31, during SM Entertainment's general meeting of shareholders, an auditor nominated by external shareholders has been appointed to position for the next 3 years.
Previously, a minor shareholder of SM Entertainment, Align Partners Capital Management, nominated Kwak Jun Ho for appointment as chief auditor. Kwak Jun Ho is a business/finance executive who has worked for 'GS Homeshopping', 'SK Hynix', 'KCF Technologies', and more. According to Align Partners Capital Management's claims, SM Entertainment has thus far appointed auditors with close affiliation to the main body of SM Entertainment since its IPO in 2000, leading to "incomplete" and "ambiguous" reports of the company's financial activities.
Furthermore, conflict over the appointment of a new auditor has induced tension among SM Entertainment's shareholders leading up to the general meeting, as speculations claimed that SM's financial activities in the past have significantly favored greater pays for producer Lee Soo Man, thus damaging the company's overall market value.
In response to the latest developments, SM Entertainment has issued an official statement, confirming the appointment of auditor Kwak Jun Ho beginning in 2022.
Additionally, SM Entertainment's CEO Lee Sung Soo relayed, "We will consider the developments of this general meeting a turning point directed toward the building stronger relationships with our shareholders. We plan to carefully consider the various requests filed by our shareholders, and show growth and improvement in the near future."
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Having an EXTERNAL auditor with no ties to the company gives investor some sense of security that whatever findings they come across it will not be bias or swayed. Its a key element in responsible accounting and GAAP principles. Not saying that Lee Soo Man is hiding anything, but external auditing will give shareholders confidence that whatever financial reports the auditor prepares will be neutral. Korea was known to give "the Korean Discount" in business transactions in the past which made their financials really hard to discern what was their actual worth. Lately, in an effort to be accepted more globally Korea has adopted IFRS which is generally accepted in Europe and recognized in US.