The dispute over the mass stock selling by Kakao Pay executives continues to reverberate, suggesting the depth of the problems with their technically legal yet governance-wise irresponsible decision that was fairly “innovative” -- so much so that authorities are expected to use the scandal to ratchet up regulations against online startups.

Kakao Pay, a mobile payment unit of Kakao, which operates the country’s dominant mobile messenger Kakao Talk, was once touted as a shining example of fintech innovation. But its public image plunged to a nadir with the controversial exercise of stock options by Kakao Pay chief Ryu Young-joon and seven other executives on Dec. 10.

By selling around 440,000 shares, they received nearly 90 billion won ($75.6 million), about half of which was pocketed by Ryu.

The top managers of Kakao Pay tried to justify their moves by saying that the options were exercised through after-hours block trading and there was no violation of the law.

Their excuses for taking such huge profits failed to calm nervous shareholders, as the stock dumping led to a steep slide in share prices of not only Kakao Pay but its affiliates.

Kakao Pay CEO Ryu withdrew from the procedure to become the co-CEO of Kakao, amid a firestorm of criticism from the company’s labor union, lawmakers and retail investors.

Why was the backlash so fast and furious? The main reason is that Ryu and other executives made a fatal mistake of ignoring one of the unwritten yet fundamental principles of responsible executives.

Given that Kakao Pay managed to get listed on the local stock market in November last year through an initial public offering, the mass stock option exercises by top managers in the following month are widely seen as unprecedented and, more importantly, a result of their greed to reap quick profits at the expense of investors.

For a fintech company like Kakao Pay, such concerted move raised questions about whether its parent Kakao can maintain proper corporate governance, at a time when the latter’s rapid expansion by gobbling up smaller startups invited both public criticism and regulators’ attention.

If Kakao’s management failed to see what would result from exercising the stock option, it implies it is utterly incompetent. If Kakao okayed the move with the full knowledge of its potential impact, it suggests its governance system is deeply flawed, if not near-absent. Either way, the latest incident illustrates how a legally legitimate yet ethically questionable corporate act could backfire, setting off a chain of ripple effects.

Aside from the ethical dispute, the scandal has brought about three regrettable outcomes. First, the incident confirms that when corporate greed breeds misdeeds, it is almost always individual investors who suffer the most. Worries remain about Kakao’s other affiliates such as Kakao Mobility and Kakao Entertainment that are pushing for IPOs.

Second, regulators have been given a great excuse to put up more regulations against startups, citing poor governance. This could reverse years of demand for authorities to loosen regulations.

Third, the scandal sets a bad example by sending a misguided signal to other startups that are equally keen to take quick profits as long as methods are technically legal.

Corporate greed is nothing new, but what happened at Kakao Pay is uber-inventive in a way that shocks shareholders with plunging stock prices and hard-working startups with extra regulations.

To prevent future fly-by-night practices, financial authorities should tighten up IPO screening for tech firms and Kakao must take all possible steps to overhaul its malfunctioning governance rules.