Korea’s PE industry pivots toward “social responsibility” as a high-profile bakery tragedy reshapes investment standards

Worker death exposes failure in early response
Critical public scrutiny continues despite reforms
Investors demand stricter oversight of safety and labor practices

A worker’s death at a popular Korean bakery-and-café chain has pushed corporate responsibility to the forefront of public debate, and the investment industry is rapidly shifting in response. After the company’s handling of the incident drew harsh criticism, the market began reassessing the role and obligations of business operators. Private equity managers, in turn, have started moving away from a returns-only mindset and are incorporating non-financial criteria into their investment evaluations. Cases involving responsibility-focused PE managers—and the broader discussions unfolding across the industry—suggest the change is not temporary but a structural transformation of investment standards.

The facade of an emotional lifestyle brand

According to the investment banking industry on the 20th, Korea’s Industrial Accident Compensation Insurance Fund recently instructed private equity firm JKL Partners to strengthen its monitoring of labor conditions and other social-responsibility factors. The directive followed the death of an employee at London Bagel Museum (LBM), a chain owned by a JKL blind fund, and reflects a growing consensus that workplace safety risks fall squarely within a manager’s oversight duties. Earlier this year, the fund selected five PEF managers and committed a total of 1.64 billion dollars, including approximately 41.2 million dollars to JKL.

The incident dates back to July. A 26-year-old employee, identified as A, who had worked at LBM for 14 months, died after struggling with extreme overwork at the newly opened Incheon 7th branch. The tragedy occurred just four days after the store opened. Yet the case surfaced only in late October, three months later. Once publicized, long-suppressed frustration and exhaustion among past and current employees burst into the open. Former staff members posted schedules and messages implying excessive hours, and consumers began scrutinizing the reality behind a brand long celebrated as an “Instagram hotspot.”

The company’s leadership worsened the backlash. Ryeo, the creative director who built LBM’s brand identity and public persona, switched her social-media accounts to private and removed her YouTube videos immediately after the scandal grew. Having long promoted the message of “respecting each individual’s life” in interviews and essays, her silence following an employee’s death quickly inflamed public anger. Her previously admired personal brand became a liability.

The IB industry also took the matter seriously. JKL Partners finalized its approximately 1.37 billion-dollar acquisition of LBM in August—meaning the death occurred after the signing of the SPA but before closing. This raised questions about whether the risk had been identified or reflected during due diligence. Meanwhile, the Ministry of Employment and Labor launched a formal inspection of all 18 LBM locations on October 29, further intensifying scrutiny of the brand’s operating structure, accountability, and crisis response.

Growing pressure to improve labor conditions across the sector

LBM has since attempted to contain the fallout. After initially denying that overwork was involved, the company reached a settlement with the bereaved family, issued an apology, and began organizing documentation for the government’s labor inspection. It also launched a review of labor processes across stores. This signaled internal acknowledgment that the issue extended beyond a single branch and reflected deeper structural flaws—marking the erosion of its founder-centric operating model.

LBM’s management structure had long been criticized. Founder Ryeo oversaw everything from product concepts and interior design to hiring and operations. But under this centralized model, internal controls failed to keep pace with rapid expansion. Former employees described routine three-month and six-month contract cycles and near “home-workshop-level” operational systems. This meant headquarters lacked any real ability to govern working conditions or maintain consistent standards across stores.

The backlash soon extended to JKL. With public funds invested in its vehicles, the manager faced criticism that “public money ended up in a company accused of labor abuses.” The fact that LBM was acquired using capital from a fund partly financed by the Industrial Accident Compensation Insurance Fund intensified the controversy. The private equity sector was already under scrutiny following previous cases such as MBK Partners and Homeplus, and the LBM scandal placed JKL squarely in the spotlight.

The issue also spread across the broader F&B and franchise industry. Cases reminiscent of LBM surfaced nationwide—such as meat restaurants allegedly structuring their operations as “under-five-employee” establishments to avoid labor protections. These incidents fueled public anger over “youth labor exploitation behind entrepreneurial success stories.” At the same time, the exposures began creating momentum for strengthened regulations and labor-standards enforcement.

Social responsibility becomes the new industry baseline

Today, the market views corporate social responsibility far more seriously than before. MBK Partners placed “responsible investment principles” at the center of its annual general meeting this year, where it revealed the creation of an internal Social Responsibility Committee and the completion of personal guarantees and capital contributions by senior executives as part of the Homeplus restructuring. MBK emphasized that “protecting companies and communities in crisis is part of an investor’s duty.”

The broader PE industry is shifting in the same direction. In his inaugural address, the new chairman of the PE Association stated that private equity must evolve into “transparent, responsible capital” rather than pursuing returns alone. This signaled an industry-wide move toward incorporating labor conditions, local-community impact, and environmental considerations into investment reviews.

A recent example was NoAn Partners’ withdrawal from a consortium considering an acquisition of SK Oceanplant. The firm abandoned the bid entirely due to intense local opposition and political concerns. As the sale process unfolded, investors began evaluating managers on their ability to manage stakeholder risk and navigate public sentiment. Managers, in turn, realized that focusing only on financial metrics would put them at a disadvantage in fundraising.

These developments are transforming the investment philosophy of the entire market. Investors are now assessing not only financial returns but also workplace safety structures, consumer-trust recovery plans, regional-community engagement, and data-protection systems. For managers, systematically integrating these criteria into fund strategies and value-creation plans is becoming essential to winning capital commitments. The industry is entering an era in which long-term trust and stakeholder management—not just short-term returns—form the core of competitive strength.