SM Entertainment Rebuffs EXO Chen, Baekhyun, And Xiumin's Claims Of Non-Transparent Accounting And Unreasonable Contracts In A New Statement

On June 1, 2023, EXO‘s Chen, Baekhyun, and Xiumin announced they were suing SM Entertainment to terminate their exclusive contracts. They cited not being provided with the accounting records concerning their payouts when they asked for them, as well as long contract renewal periods of up to 2027 and 2028.

Regarding EXO-CBX‘s claims, SM Entertainment has released a long statement. They have denied claims of not providing accounting records throughout the years and insist that the members raised no issue until recently.

Hello. This is SM Entertainment. As we have received notification from the representation of Byun Baekhyun, Kim Jongdae, and Kim Minseok (hereafter referred to as ‘the artists’), our company will also be releasing our point of view.

Firstly, EXO is an artist that our company truly thinks of preciously. Because of that, even during the period of our current contract, we have already increased their salary rates twice. We have been paying our artists for many years under the circumstances that they can check our accounting records at any time. During these years, they have not expressed any dissatisfaction with our payout process at all. Even during the point in time when we were discussing contract renewals with our artists as their current exclusive contract was coming to an end, as the discussion ended on a note of equal footing, Byun Baekhyun, Kim Jongdae, and Kim Minseok all signed new exclusive contracts with us, and during this process, no problems arose due to payment issues.

However, their legal representative suddenly began claiming that this new exclusive contract could not be acknowledged, and we began receiving tip-offs that there were external forces that were causing our artists to waver. Our company was very taken aback, but in order to completely respect our precious artists’ opinions, we suggested signing a mutual agreement, and we requested that instead, they had to reassure us that they did not sign any double contract that violates our exclusive contract. Then, the artists’ legal representative, who had first suggested signing the agreement, suddenly changed his attitude and halted discussions of the agreement, and informed us that they would be terminating their exclusive contract with us without any explanation regarding the double contract.

1. Transparency regarding payouts

Every month we undergo the payout process, and it is possible to view the accounting data. The artists have not raised any problems regarding payouts. Even though it is possible to view the accounting data at any time, they requested ‘duplicate copies’ of the data for other motivations and used this as a reason for termination.

Firstly, it is completely not true, as per the claims of the artists, that we have not properly provided the accounting data, and we will explain this in detail. Before the revision of the Pop Culture and Arts Industry Development Act, our company had been settling our payouts twice a year. After the revision, we have been settling it once a month. Regarding the data, the artists could visit the company whenever they want, and we have been cooperating with this so that they can check the data. Whenever the artist visited, we have been separately providing the artist with the expenditure records, and the artist has not raised any issues recording our payout methods. But just as we have mentioned before, external forces have approached our artists and spread false rumors. We have also received a tip-off that they have tried to incite the artist and have been suggesting to our artist that it does not pose a legal issue if they sign exclusive contracts with them, ignoring our exclusive contract with the artist. So to speak, we cannot help but suspect that the external forces had been influential in the artists raising issues about the payouts or asking for duplicate copies of all of the accounting data.

Accordingly, we have already explained several times that all of the accounting data, both the existing and past data, can be viewed, and the artist will be allowed to check in detail, as much as they want, in accompaniment with a professional such as representatives and accountants.

— SM Entertainment

It seems that SM Entertainment denied a recent request to create copies of accounting records after suspicions that EXO-CBX was being swayed by external forces.

But recently, as we have already sufficiently explained to the artists’ legal representative, we only allow viewing [and not copies] because it could be unfairly provided to a third party, such as the external forces mentioned above. Even so, in the first place, not only did the artists’ representatives show no response that they would check the contents first, but they also did not promise that they would not provide the data to external forces. He also did not respond to the fundamental question of whether a double contract had been signed with the external forces or if any discussions were underway, and only robotically repeated that they had no choice but to terminate the contract as we did not provide duplicate copies of the accounting data.

Ultimately, provision of duplicate copies of the artists’ accounting data is a problem that we cannot sit by. For example, if detailed promotional records that are in the data are leaked to external forces, the other members apart from those three members could receive unfair damage. Hence, our company requested to check if there was a double contract signed between the artist and external forces, but the artists’ representative did not reply and soon sent an official notice that they would be terminating the exclusive contract.

— SM Entertainment

SM Entertainment also explained that their contracts were all based on the standards created by the Fair Trade Commission. The contracts were also acknowledged by the Supreme Court.

2. Regarding the existing contract and the new contract’s legitimacy and validity

The contact was made according to the standard exclusive contract.

The contractual period, legitimacy, and validity have both been acknowledged by the Supreme Court.

Regarding the new exclusive contract signed on December 30, 202, the contract was completed after agreements about the detailed clauses, with large-scale law firm lawyers on the side of the members.

Secondly, we will explain the legitimacy and validity of the new and existing exclusive contracts. The company is faithfully adhering to the standard exclusive contract established and recommended by the Fair Trade Commission and the Ministry of Culture, Sports, and Tourism. The contract was recognized for its validity and legitimacy by the Supreme Court in a past lawsuit filed by former member Hwang Zitao, in a lawsuit that confirmed the non-existence of an effective exclusive contract. Even so, we also signed two annex agreements with the EXO members, including the artists in question, to change the salary rates in favor of the artist. This was a measure we took to promote the shared growth of our company and artist, even though there was no contractual obligation [on our side].

We wish to strongly point out that we are ensuring that the artists receive sufficient assistance and that they can sign contract renewals of their free will with us after in-depth discussions. In actuality, although Girls’ Generation and f(x) members, etc., have signed exclusive contracts with other companies, they maintain good relationships with the company. Especially for Girls’ Generation’s case, even after three members moved to other agencies, they have released albums with our company and joined in on SMTOWN performances. On the other hand, there are also cases where after careful consideration, many artists have re-signed with us more than once, such as TVXQ and Super Junior, etc., who both have re-contracted with us twice.

— SM Entertainment

Lastly, SM Entertainment reinforced that the renewal contracts and agreements were created after a very long period of discussion and mutual compromise with the artists.

In actuality, at the point where the artists in question’s contracts were coming to an end, we did not force renewals upon them, and they received assistance from large-scale law firm lawyers and re-contracted with us after sufficient agreements. Our company had a very long period of discussion with EXO, spanning from June 2021 to the end of 2022, lasting almost a year and six months. On December 30, 2022, the seven members re-contracted with us. The members who re-contracted with us have their contract starting periods all different due to their military periods differing. But because we know the importance of EXO as a team, the members and the company proceeded with renewal discussions, starting with the members that concluded their contracts first. During the process of discussion for renewals, the large-scale law firm lawyers hired by the EXO members have been a part of it since April 2022, and we compromised with each other in the process. In particular, from mid-November 2022, we exchanged amendments for around an entire month with the members’ representatives, totaling eight times, and completed detailed discussions on each and every word in the clauses of the exclusive contract. Despite this, the artists’ recently appointed representative suddenly changed their position and claimed that the validity of the new contract could not be acknowledged, leading us to make the good guess that what we received a tip-off on is true.

Our company’s biggest goal is to protect EXO and the fans who have given EXO infinite love and support, and taking it a step further, to also protect all of the artists under us. In order to reach this, we will take strong legal action against external forces that try to shake and break up the team by misleading the artists with baseless rumors, sweet words, and unfair financial temptation.

Thank you.

— SM Entertainment

You can read more about EXO Chen, Baekhyun, and Xiumin’s original claims below.