Governance does not simply refer to the ‘corporate governance’ as a formal element of a company. Margaret M. Blair, an economist who specializes in corporate law and finance, defines Governance as "the legal, institutional, and cultural mechanisms that determine who exercises ultimate decision-making power and how profits and risks are allocated in companies with dispersed ownership."

Furthermore, she explains in her book Ownership and Control that discussions are needed regarding subjective criteria such as ‘fairness’ and ‘fair play’ in forming a governance structure between the two parties.

This implies that it is also aligned with the need for ‘organizational culture integration’, which is also a key element of successful M&As. Min Hee-jin, who pointed out what is fair and what is fair play that does not erode the industry itself, mentioned the importance of ‘cultural integration’ by mentioning the interests of shareholders and breach of duty within a merger structure that is only multi-label in form.

Companies have formal elements that they can control the most.

• Governance
• Operating Model
• Evaluation System
• Physical Environment

These are visible elements that can be seen or understood through documents, such as strategy, operating models, or job descriptions. Therefore, it is a result of explicit decisions by leaders within the company and can be changed.

However, there is also an informal element called ‘culture’ within a company. It is composed of a collection of beliefs, values, and norms that shape how one understands oneself in relation to others, how one behaves, and what is important to a team. Therefore, one should study what is considered meaningful in the implicit and intangible aspects of an organization, the definition of ‘us’ and ‘them’, work practices and habits, and what ideals and successes are.

• Value System
• Power Dynamics
• Narrative
• Norms and Beliefs

The important thing is the current situation where this cultural integration has not been achieved.
Yesterday, South Korea witnessed a stage where a representative responsible for an organization, choked with tears and poured out anger.

A. The hidden problem has been revealed.

HYBE, which wrote the myth of BTS, successfully launched global groups such as NewJeans, Le Sserafim, and Seventeen through a multi-label structure. While the parent company and its subsidiaries share very similar core competencies, technologies, and market focus, it was confirmed that they actually have very different values and behavior patterns. Min Hee-jin pointed out that the ‘formula’ and ‘flow’ to success were copied by not external parties but internal subsidiaries.

B. Lost in interpretation.

The two sides had different meanings for the title of ‘HYBE’s first girl group’. Min Hee-jin said that she attached importance to this title and planned and conducted a separate audition. She explained that she made the issue because of her responsibility for the title she had promised to the children who had entrusted their future to her and their parents. On the other hand, HYBE felt strange and uncomfortable with the employee who refused the members they intended, due to the nature of the governance structure. Although it was a natural request, it was rejected as if it was natural, and the heads of the two organizations became emotionally distant.

C. A clash of cultures has occurred.

Min Hee-jin said that she was furious when she received 2 billion won as an incentive after achieving record-breaking performance, but another representative who had not achieved any performance received 1 billion won. Experiencing differences in incentive structures, communication styles, etc., means that both the formal and informal structures between organizations are misaligned. We are currently witnessing a clear example of this potential tension. While it was ironically an opportunity to identify the standards that need change, in which they can work together synergistically in the current situation, this was left to HYBE.

Culture is complex and interconnected. Moreover, it is an industry where creativity is branding and competitiveness, and it is a case where cultural integration between companies with global influence, watched by fans around the world, is an issue.

The multi-label system may seem ideal as a formal element, but the integration of informal elements that have not been sufficiently considered is likely to determine whether the future of the industry will grow or decline. It seems that questions need to be raised about whether to measure culture or how to evaluate it.

Did the chairman of an 8.8 trillion won market cap company have to show his jealousy of NewJeans’ success?
Why did the representative who shouted ‘I did it all’ take the role and power of the capital he received for granted?

A very human aspect that we often see in life and a live account of a successful worker’s complaints that we see for the first time in our lives.

https://v.daum.net/v/20240426152238750

Reference:

Cultural Integration: ReD’s perspective

Rethinking Corporate Governance for the Twenty-First Century