The reason SM employees turn their back on Lee Soo Man, “Even if the contract is terminated, he will still earns 50 billion won for 10 years”
Align Partners revealed the contract of SM’s founder and former executive producer Lee Soo Man, claiming it an “Emperor’s contract”
On February 9th, Align (Align Partners Capital Management) revealed that Lee Soo Man is trying to maintain his contract with SM Entertainment in order to receive 6% of SM music revenue in the name or royalties even after his contract expires and until 2092.
According to the original contract released by Align, Lee Soo Man’s personal contract with SM Entertainment remains the same in accordance with the post-contract settlement agreement in the “Like Planning Producing License Agreement Attachment 2”.
Under the post-contract settlement agreement, Lee Soo Man will receive 6% of royalties by 2092 for the released physical and digital albums without any obligation for service. As for the management revenue, he will receive 3% of royalties by 2025.
In other words, Align estimated that Lee Soo Man will get paid more than 40 billion won throughout the first 3 years and more than 50 billion won over the next 10 years.
As the company’s valuation was excessively undervalued due to the contract with Like Planning, which led to the large losses of shareholders and excessive exploitation of SM’s profits, Align terminated the contract with Like Planning early through a shareholder’s proposal.
However, even after Like Planning contract was terminated, Lee Soo Man still takes SM’s net profits, including music revenue, under the post-contract settlement agreement. As a result, Align considered this an unfair “Emperor’s contract” and decided to disclose the original contract.
According to News1’s report on February 9th, the reason Align disclose the document is to respond to the suspicion of Align trying to induce and gather minor shareholders to “vote” in a possible management dispute. In fact, even Kakao, which recently emerged as the second-largest shareholder by acquiring SM stakes, can hardly compete with Lee Soo Man, the largest shareholder who currently holds more than 16%.
In this regard, experts in the stock industry expect the management dispute to end with a victory of the current management team and Kakao to provide favorable results for the company’s valuation and stock price. They said, “Until now, the company’s performance profits have not been shared with shareholders, executives, and employees”, adding “In order to improve long-term shareholder value, SM’s victory is more advantageous”
Source: wikitree
