SM Clarifies Reports About Suspicious Internal Transactions With Lee Soo Man's Company

On May 29, news outlet The Korea Economy Daily reported that a company named Like Planning has been receiving an annual payment of over 10 billion won (approximately $8.4 million) from SM Entertainment. According to the report, about 44 percent of SM’s total profits for the past five years was used to pay Like Planning.

Like Planning was created by Lee Soo Man in 1997, and SM’s business report states that the company is in charge of producing and audio for SM artists’ albums. It is reported that Lee Soo Man owns 100 percent of Like Planning shares.

SM’s payments to Like Planning have increased every year. In 2017, the payment was 10.8 billion won (approximately $9.06 million won), which is almost the same amount as SM’s total business profits of 10.9 billion won (approximately $9.1 million won) for the year. In 2018, Like Planning took 14.5 billion won (approximately $12 million) from SM. The amount of SM’s payments to Like Planning for the last 10 years totals up to 81.6 billion won (approximately $68.5 million).

Due to this phenomenon, many have accused the companies to be engaging in an activity called “internal transactions,” of which the purpose is to fill Lee Soo Man’s pockets. Many have also questioned the fact that since getting listed on KOSDAQ in 2000, SM has not made dividend payments to its shareholders.

The following is the full statement from SM Entertainment:

Our agency would like to officially release the following statements and make corrections regarding the reports that address our contractual relationship with Like Planning.

The producing contract between our company and Like Planning has been and continues to be considered one of the most important aspects to secure our company’s global contents’ competitiveness and growth since the beginning of its establishment. Since getting listed on KOSDAQ in 2000, we have transparently announced the contract and transactions related to it.

The contract with Like Planning was signed after thoroughly examining and comparing precedents made with similar global businesses and with consultation from professional third-party organizations. With the contract, our company produced a variety of contents with global stars such as H.O.T., S.E.S., TVXQ, EXO, and NCT, and we became a leading company in Hallyu and K-pop.

Furthermore, we once again state that there is no legal issue nor unlawful internal dealings in regards to the contract between our company and Like Planning.

We have always actively examined [ways] to increase our shareholder value. We will resolve unnecessary misunderstandings by establishing detailed plans and communicating with our shareholders even more.

As a leading company in Hallyu and K-pop, we have continuously shown growth. In 2018, we recorded a combined sales of 612.2 billion won (approximately $513 million won) with our subsidiary companies, which is 510 times bigger than what the company started with.

In addition, as a company that will continue to lead in Korean and global entertainment markets, we hope to achieve further growth in profits by expanding businesses to not only in Asia, but also in North and South America and Europe. Therefore, we plan to maximize the profits of our stockholders, employees, and artists.

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