Chairman Yunbum Choi's Partial Victory... MBK Expands Its Influence (Comprehensive 2nd Report)

Korea Zinc’s 11-Hour Shareholders’ Meeting Concludes
Friction from the Start... Three-Hour Delay in Opening
Chairman Choi Secures Reappointment... Board Shifts from 11-4 to 9-5
Heated Dispute Over Cumulative Voting Criteria... Litigation Possible
Honorary Chairman Benefits Curtailed... Partial Amendment of Articles of Incorporation

Yoonbeom Choi, Chairman of Korea Zinc, is speaking at a Korea Zinc press conference held at the Korea Chamber of Commerce and Industry in Jung-gu, Seoul, on November 13, 2024. On that day, Chairman Choi stated, "I will step down from the chairmanship of the board as soon as possible and have an outside director take over as the chair of the Korea Zinc board." Photo by Hyunmin Kim

At the Korea Zinc regular shareholders’ meeting, Chairman Yunbum Choi succeeded in being reappointed, thus defending his management control. However, the alliance of Young Poong Group and MBK Partners also increased their number of board members, thereby expanding their influence. The gap in the number of directors secured by each side narrowed from seven to four.

At the shareholders’ meeting held at the Koreana Hotel in Jung-gu, Seoul, on the 24th, Chairman Choi was reappointed as an inside director. Alongside him, Deoknam Hwang, the board chairman and a nominee of the company side, also remained on the board. Walter McLaren, a candidate from the U.S. Crucible JV, was newly appointed as a director. From the Young Poong and MBK Partners camp, Yeonseok Choi, Vice President of MBK Partners, and Sunsook Lee from Minjoo Law Firm, among others, joined the board. As a result, the board composition, previously 11 Korea Zinc directors and 4 from Young Poong and MBK Partners, was reorganized to 9 versus 5.

Three-hour Delay in Opening... Tension Over Number of Directors Appointed

The regular shareholders' meeting of Korea Zinc is being held on the 24th at the Koreana Hotel in Jung-gu, Seoul. Korea Zinc

The shareholders’ meeting was fraught with friction from the start. Although it was originally scheduled for 9:00 a.m., the verification of duplicate proxy forms continued, and entry did not begin until 9:54 a.m. With further delays, the meeting eventually commenced around noon, three hours behind schedule.

Tension was palpable even outside the venue. Korea Zinc labor union members, who had traveled from the Onsan Smelter, staged a protest at the entrance to the Koreana Hotel, holding placards reading, “MBK, it’s time to step back,” and “We will protect national company Korea Zinc to the end.” Since the onset of the management dispute between Korea Zinc and Young Poong Group-MBK Partners, the Korea Zinc labor union has consistently supported the current management.

There was fierce contention over how directors would be appointed. The key issue was how and how many of the six directors whose terms expired that day would be selected.

The Young Poong-MBK alliance proposed appointing six directors, while Korea Zinc’s side, represented by Yumi Development, proposed appointing five. The Young Poong-MBK camp believed that if six were elected, the cumulative voting system would result in a 3-to-3 split, narrowing the gap in board representation. They also calculated that, if votes were dispersed in an effort to protect Chairman Choi, they might secure more board seats. The cumulative voting system allows shareholders to cast as many votes as the number of shares they hold multiplied by the number of directors to be elected, letting them concentrate votes on specific candidates.

By contrast, Chairman Choi’s side suggested appointing five directors, with the remaining one to be selected as an audit committee member at a future extraordinary shareholders’ meeting. Reducing the number of cumulative voting targets to five would minimize vote dispersion, allowing Chairman Choi’s side to secure three directors and Young Poong-MBK’s side two. In the vote, although the proposal to appoint six directors received a majority, under the principle that only the top vote-getters are elected, five were appointed. In the subsequent director election, Chairman Choi’s camp secured three seats (including one from the U.S. JV). Thus, Chairman Choi succeeded in being reappointed and maintained board majority.

Too Soon to Call It a ‘Complete Victory’ for Chairman Choi... Potential for Legal Disputes Remains

Although Chairman Choi’s camp defended management control, observers note it cannot be considered a complete victory. The narrowing gap within the board has increased the influence of the U.S. joint venture, Crucible JV. Since Young Poong-MBK is also seeking to win over U.S. investors, the outcome of future boardroom confrontations is drawing attention.

Opposition from institutional investors, including the National Pension Service, was also a painful point for Chairman Choi. The National Pension Service, holding a 5.2% stake, abstained from voting on Chairman Choi and Board Chairman Deoknam Hwang (proposed by the company), as well as accountant Byungwook Park from Accountancy Firm Chung (proposed by Young Poong-MBK). This abstention, in the context of a fierce confrontation, effectively acted as a brake. The National Pension Service explained its abstention by stating, “It is because the individuals concerned have a record of undermining corporate value or infringing on shareholder rights.”

The conflict over the rules of the cumulative voting system between the two sides also leaves open the possibility of litigation. The cumulative voting system allocates voting rights as a multiple based on the number of directors to be elected. However, some foreign institutional investors exercised their voting rights only for specific candidates. Whether to accept these unexercised votes as they are, or redistribute them proportionally, could affect the results.

The Young Poong-MBK camp argued that changing the applied standard suddenly on the day of the shareholders’ meeting was not just a matter of interpretation, but an attempt to directly influence the outcome. A representative for Young Poong-MBK stated, “Last year, Korea Zinc did not redistribute unexercised votes in such cases, but counted only the votes actually cast. At this meeting, however, they reversed the previous standard and argued that uncast votes should be redistributed ‘pro rata’.”

On the other hand, Korea Zinc’s legal counsel countered, “When foreign investors exercise voting rights, they often do not fully understand the cumulative voting system and end up exercising only a portion of their available votes. If this is not intentional, but rather a structural or systemic issue, it should be corrected.”

Limits on Honorary Chairman Benefits... Partial Amendment to the Articles of Incorporation

Park Giduk, President of Korea Zinc, is presiding over the regular general meeting of shareholders held on the 24th at the Koreana Hotel in Jung-gu, Seoul. Korea Zinc

In addition to director appointments, shareholders voted on 13 proposals to amend the articles of incorporation. First, the proposal from Chairman Choi’s camp to increase the number of separately elected audit committee members from one to two was rejected. Chairman Choi’s camp had intended to leverage the “3% rule,” which limits major shareholders’ equity to 3% in such elections, but was unsuccessful.

Most of the amendments proposed by the Young Poong-MBK camp were also rejected. These included: ▲ stock split ▲ introduction of directors’ duty of loyalty for new share issuance ▲ adoption of the executive officer system ▲ changing the chair of the shareholders’ meeting to the board chair ▲ changing the procedure for convening board meetings (from one day to three days prior). Only the proposal to change the board meeting convening procedure passed, with the support of Chairman Choi’s camp.

Meanwhile, the proposal to increase the cap on director remuneration by KRW 2 billion, raising it to KRW 12 billion (an increase of KRW 2 billion compared to the previous year), barely met the ordinary resolution requirement with a 53% approval rate. The proposal by Young Poong-MBK to exclude “honorary chairmen” from the current executive retirement pay regulations passed, despite a recommendation for opposition from management.

Previously, the world’s largest proxy advisory firm, ISS, also recommended voting against this proposal. In the past, honorary chairmen Changyoung Choi and Changgung Choi, family members of Chairman Choi, received annual compensation of around KRW 5 billion each despite not being registered executives. At the 2023 shareholders’ meeting, Korea Zinc also passed a proposal to increase the retirement pay multiplier for chairmen from three to four times, applying the same standard to honorary chairmen. ISS commented, “The company claims that this structure was approved by shareholders at previous meetings, but providing the same benefits as the chairman to individuals without responsibility or duty does not align with sound corporate governance principles.”

This content was produced with the assistance of AI translation services.