Shinsegae Group on the 26th issued a public apology over Starbucks Korea's May 18 Democratization Movement anniversary "Tank Day" marketing controversy and released the findings of its fact-finding probe. It explained the planning and approval process behind the disputed marketing, whether there was intent, issues in the internal approval system, and whether it communicated with Starbucks' U.S. headquarters. It added, "We will create programs so the entire group can have a proper sense of history."
Shinsegae Group on this day held a press briefing at the Josun Palace Hotel in Gangnam District, Seoul, and announced the internal fact-finding results and follow-up response plans regarding the Starbucks Korea "May 18 Tank Day" marketing controversy. The probe ran for the past week.
Four group officials attended the briefing: Executive Vice President Jeon Sang-jin, Executive Vice President Kim Su-wan, Managing Director Lee Gyu-bong, head of management support, and Managing Director Yang Jong-hwan, head of the audit team.
They explained the previously raised suspicions and issues, including whether employees colluded in advance, whether the "Tank Day" naming targeted May 18, why three key employees refused to submit their phones, inadequate verification in the internal approval process, the connection to marketing on Apr. 16, known as the date of the Sewol ferry disaster, prepaid card refund issues, and the response from Starbucks' U.S. headquarters. The following is a Q&A.
-What specific investigations did you conduct over the past week?
(Audit team head Yang Jong-hwan) "Those surveyed totaled 15: five executives, five working-level staff involved in the task, and five in the approval and consensus line. We conducted forensic work on internal tools used at the company, including corporate email, work laptops, and internal messengers. Through this, we checked digitally whether there was prior collusion and whether there was evidence to support it. We then interviewed more than 10 people directly and cross-checked the consistency and credibility of their statements."
-Groups related to May 18 and Gwangju citizens suffered deep hurt from this incident. Is Chairman Chung Yong-jin willing to visit Gwangju in person to apologize?
(Head of management Jeon Sang-jin) "We could consider going at an appropriate time going forward. However, we determined that uncovering the facts should come first. We conducted an investigation according to internal procedures, and there are still parts we have not clarified. When the time is right, we think the group can make a public statement, such as visiting the site in Gwangju."
-What does Chairman Chung Yong-jin mean by "I take full responsibility" in the public apology?
(Head of management Jeon Sang-jin) "Events by the Starbucks Korea commerce team are finalized by the decision of the affiliate's CEO. Still, Chairman Chung saying he will take full responsibility means that, as group chairman, he has no intention of avoiding responsibility for this matter. Regardless of the results of the investigation, he will take responsibility until the situation is fully concluded, and he intends to directly oversee recurrence prevention measures and raising the entire group's level of historical awareness. Understand it as taking responsibility for all aspects, including the outcome of the police investigation."
-It was said that three officials who proposed the "Tank Day" NAMING. refused to submit their phones. Why? Also, can you not determine whether this marketing was carried out with intent?
(Audit team head Yang Jong-hwan) "A total of five employees planned the event. Two expressed a desire to prove they were not involved in this incident and submitted their phones. The remaining three refused to submit their phones, citing privacy. The company sought to cross-check, through forensic analysis of all five phones, whether there had been prior collusion or planning in private conversations, but we could perform forensics on only two. Because of this, there were limits to fully determining overall prior intent."
(Head of management support Lee Gyu-bong) "There was a chatroom on the internal messenger used by the five employees. Analysis of that chatroom showed they appeared flustered after the incident, allowing for the inference that this may not have been premeditated. However, we cannot be definitive because we have not yet confirmed the private conversation areas that could be checked via phone forensics."
-It is also an issue that Starbucks released the "siren mug" on Apr. 16, the remembrance day two years ago marking the 10th anniversary of the Sewol ferry disaster. Did you investigate that matter as well?
(Audit team head Yang Jong-hwan) The siren is Starbucks' corporate CI. More than 500 products featuring the siren logo are offered. As individual product events were planned for individual dates, some of those dates happened to be set for Apr. 16. We need to investigate further on this. For reference, there were siren-related events on Apr. 16 in 2010 and 2013 as well.
-There are criticisms that such incidents occur unusually often at Starbucks. How do you assess the organizational culture?
(Head of external relations Kim Su-wan) "We looked at what events took place on Apr. 16 and May 18 over the past 10 years. Starbucks events usually run on a two-week cycle, and promotions happen weekly, so it appears there was not great consideration of the significance of specific dates. We believe this incident calls for reflection on historical awareness.
The marketing employees are two in their early 20s and three in their late 30s. It seems their historical awareness in some respects differs from the sense of history felt by the company or society. After the incident, their conversations included remarks that did not fully recognize the seriousness of the matter. We are considering how to create a historical awareness program that can encompass those in their 20s through their 60s. We will create programs so the entire group can have a proper sense of history."
-There is criticism that to get a refund of Starbucks prepaid card balances you must use at least 60%. Do you have improvement plans?
(Head of management Jeon Sang-jin) "We understand there have been strong demands for refunds and for membership cancellations since the incident. We are working to improve in the direction customers want. However, for prepaid vouchers, under the Korea Fair Trade Commission's standard terms for new-type vouchers, there is a rule that a certain portion must be used to qualify for a refund. We are discussing this with the relevant ministries. On-site refund system adjustments are also necessary. We are reviewing swift action and will inform you again through a subsequent announcement."
-What problems were there in the internal approval process related to this incident?
(Head of management Jeon Sang-jin) "Event planning goes through four stages in total before reaching the CEO for approval. Normally, departments such as CSR, which handles corporate social responsibility, and legal could be included in the review process, but we confirmed that such parts were excluded this time.
The commerce team runs many events on a weekly basis. In the marketing process, it appears they focused only on sales and did not sufficiently consider the meanings of dates and expressions.
We also confirmed that the parties involved had routinely approved electronic sign-offs as a matter of habit. We are discussing how to improve this systematically."
-Are there no separate measures regarding the CSR team?
(Head of management Jeon Sang-jin) "We think we need to investigate further. We are also preparing process improvement measures. We will make a separate announcement once things are finalized."
-Some say this is "cutting off the tail," shifting blame to only a few employees. What is the group's position?
(Head of external relations Kim Su-wan) "On the evening the incident occurred, we dismissed CEO Son Jeong-hyun, the top responsible official, and the executive in charge of the commerce team. Recognizing the gravity of the matter, we took the necessary action. We are prepared to hold people accountable according to the investigation results."
-The marketing controversy is spreading into political strife. Some interpret it in connection with Chairman Chung Yong-jin's past remarks. What is the group's position?
(Head of external relations Kim Su-wan) "We reiterate that the chairman's past remarks are unrelated to Starbucks' inappropriate promotion in this case."
-Was there any feedback from Starbucks' U.S. headquarters regarding this incident?
(Head of management Jeon Sang-jin) "Global headquarters also recognizes the gravity of this incident. Starbucks operates around the world, and its brand value stems from respecting local sentiments and cultures. The local media are also reporting extensively on this matter. We have been sharing everything from personnel actions taken right after the incident to the status of the investigation. Today's briefing was also conducted in coordination with headquarters."
-Was there any separate communication with the government?
(Head of management Jeon Sang-jin) "We have not communicated separately with the government since the incident. We are also learning through news reports, media coverage, and messages from the president. Of course, regardless of that, this marketing should never have happened, and we believe the company must take responsibility."
-Is there a possibility of an investigation by U.S. headquarters or the exercise of a call option?
(Head of management Jeon Sang-jin) "We are closely sharing the progress of this incident with U.S. headquarters. U.S. headquarters also views this matter gravely. We also plan to consult with U.S. headquarters on internal risk management, internal control processes, and procedural improvements. My understanding is that we will hold official consultations with U.S. headquarters within a few days.
As for whether to exercise the call option, we have nothing to say at this time. It is true that the contract specifies that a call option can be exercised in the event of nonperformance due to a cause attributable to a party. However, our position now is that this matter does not fall under that. U.S. headquarters has also not raised an issue or discussed this yet."
-To what extent has Starbucks Korea's revenue been affected since the incident?
(Head of management Jeon Sang-jin) "There has been a very large revenue decline. However, more than that, we believe healing for all those who suffered emotional harm from this incident should come first."