It is the kind of K-drama that rivets millions of viewers – bitter boardroom battles, expensive lawyers, hostile takeover claims and high-stakes shareholder meetings – except that this is playing out in real life. The godfather of K-pop is fighting his nephew for control of the music company he founded. It features Hybe, the agency behind the smash-hit group BTS , and tech giant Kakao in an A-list battle that could determine the billion-dollar industry’s future. And it was triggered largely by one man: South Korean activist investor Lee Chang-hwan. Lee’s fund Align Partners bought a 1 per cent stake early last year in SM Entertainment, one of South Korea’s leading music companies and one that helped bring K-pop to the world, managing early hit groups such as boy bands Super Junior and Shinee . He used that stake to argue for corporate reform, saying that SM founder Lee Soo-man – the so-called Godfather of K-pop – was, in effect, siphoning off millions of dollars every year in bogus consulting fees. “It didn’t make sense,” said Lee Chang-hwan in a recent interview, saying the money – 6 per cent of publicly listed SM Entertainment ’s sales every year – was paid to a private entity called Like Planning, which was entirely owned and controlled by Lee Soo-man. The 36-year-old self-made investor, who was raised by a single mum and first gained public attention by winning a popular South Korean TV quiz show, started asking uncomfortable questions. Lee Soo-man’s pet company had raked in “nearly 160 billion won [US$120 million] over the past 20 years”, he said, as SM risked major financial and reputational damage because of the behaviour of its founder. Lee Soo-man not only created individual K-pop bands in the 1990s such as H.O.T. and S.E.S., whose success arguably laid the groundwork for the stratospheric rise of groups like BTS and Blackpink ; he came up with the industry’s whole modus operandi. He pioneered an obsessive level of training and micromanagement of “idols” – trained K-pop stars – and his idea of combining strong visual performances and aggressive overseas marketing helped make SM Entertainment an industry behemoth. He founded the company in 1989 and took it public in 2000 – so he was predictably outraged last year when SM Entertainment’s management, including his nephew, agreed with Lee Chang-hwan’s assessment and moved to terminate the “unfair” deal with Like Planning. In an apparent fit of revenge, Lee Soo-man sold the majority of his stake in SM – 14.8 per cent of the company – to one-time rival Hybe, the agency that manages BTS, for US$325 million. The move made Hybe the single largest shareholder in SM Entertainment, prompting outraged protests from SM’s management that it was a hostile takeover that would create a Hybe monopoly and damage the K-pop industry’s massive potential. In a bid to wrest back control, SM’s management brought in South Korea’s Kakao, a sprawling, cash-rich tech conglomerate that owns the country’s most popular messaging app. Kakao is now seeking to buy a controlling share of the company to block Hybe. The feud has unleashed a family succession drama, with Lee Soo-man’s nephew, Lee Sung-su, who is the company’s chief executive, taking to YouTube to air their dirty laundry. Accusing his uncle of tax fraud using overseas companies, he demanded the elder Lee “kneel down and apologise” for his alleged crimes. “Sir, please stop now … It is the only way to save you from the Valley of Death,” he said in a video posted online. Lee Soo-man has not responded to his nephew’s allegations, and could not be reached for comment for this piece, but South Korean news agency Yonhap reported he has said Lee Sung-su is a “good nephew” and that his “heart aches” because of the feud. Experts say the drama is an illustration of a perennial problem in South Korea’s dynastic chaebol conglomerates: founding families exerting control through a complex web of cross-holdings, allowing them to wield unchecked power despite not holding controlling shares. The chairman of South Korean giant Samsung Electronics, who was also the heir of the founding family, was convicted of corruption and jailed in 2017, although he was given a presidential pardon last year. Align Partners’ Lee says the SM Entertainment case is similar. “It was a bad example of a person who runs the company as if it’s his private entity … Whether it was legal or not, it is hard to accept as a shareholder,” he said. He also opposes Hybe’s bid for control of SM Entertainment, saying their efforts to create a monopoly bode ill for the market. “We thought there was great potential for further K-pop growth,” he said, adding he first started looking at investing in the industry in early 2021. “BTS was already a huge success and we witnessed the formation of a real K-pop fan base in North America and Europe,” he said. SM Entertainment was “undervalued” because of its management woes, he said, and seemed a good target.