Line Yahoo CEO confirms push to reduce Naver's control

A screenshot of the popular messaging app Line [REUTERS/YONHAP]

The CEO of Line Yahoo (LY) has confirmed that the company is urging Naver to slash its equity in the operator behind Japan's top messaging app, Line, in a conference call on Wednesday.

“Line Yahoo is requesting its majority shareholder Naver to change its capital ties,” Takeshi Idezawa revealed in a press conference call to announce LY’s first quarter earnings.

The move follows the Japanese government’s directive requesting that the company lessen the Korean company's control after a massive data breach last October.

The flash point of the request concerned whether the guidance only pertained to Line's link with Naver on data management or extended to the equity-holding structure.

The CEO's remarks make it official that the Korean internet giant is under pressure to diminish its 50 percent ownership of a joint venture named A Holdings, which has a majority 64.4 percent stake in LY. The remaining 50 percent is held by Japan's SoftBank.

“The administrative guidance from Japan’s Ministry of Internal Affairs and Communications is a reassessment of the capital-based governance relationship with Naver,” Idezawa said. “In other words, LY's ability to make strong management demands to the majority shareholder, which is also responsible for the company’s data and security management.

“All things considered, we are strongly requesting a capital change to Naver. I understand that Naver and Softbank are in discussions.”

LY is also pulling away from Naver Cloud to gradually separate employees and authentication systems from the Korean company’s cloud network, while making a similar move in the service and business domains by July.

Shin Jung-ho, LY’s Chief Product Officer (CPO) and the sole Korean member of the company’s board of directors, will also step down from his position next month after the general shareholders’ meeting on June 18.

Shin will retain his position as the CPO.

“The board of directors has decided to cut two internal director seats while appointing one more outside director, aiming for a more independent management structure and strengthened security governance for LY,” Idezawa said.

Regarding Shin’s resignation as an internal director, the LY CEO asked the public to not “interpret the move as a dismissal,” explaining that the discussion to increase outside directors to enhance security governance has been ongoing for some time now.

Lee Jong-ho, Seoul's minister of Science and ICT, said on Wednesday morning that the government “plans to address the matter with priority on the fair treatment of the overseas operations and investments of Korean companies” at a press event to commemorate two years in office.

“We are closely consulting with Naver to ensure its authority is protected to the fullest extent possible,” he said.

The data breach incident that sparked the ongoing corporate standoff resulted in the leakage of some 510,000 items of personal information about users, business partners, employees and other personnel through its subcontractor, Naver Cloud.

BY LEE JAE-LIM [lee.jaelim@joongang.co.kr]