[Initial Insight] World No.1 Korea Zinc, The Qualification of a Mother

There is a famous judgment story in the Old Testament. Two women come with a dead child and a living child, each claiming the living child as their own. King Solomon said, "Divide the living child in two and give half to each," and the real mother stepped forward, pleading not to kill the child but to give him to the other woman.

Recently, while observing the management dispute at Korea Zinc, I wondered who would be the mother pleading to save the child. If we consider the founder as the mother of a company, the mothers of Korea Zinc are the late Jang Byeong-hee and Choi Gi-ho, co-founders of the Youngpoong Group. The two families have jointly managed the company for 75 years.

Although the Jang family holds more shares in the listed company Korea Zinc, the family that has directly managed it is the Choi family. In terms of affection and contribution, the Choi family can rightfully be called the mother of Korea Zinc. The Choi family has grown Korea Zinc into the world's number one company in the non-ferrous metals sector.

Problems arose as the company passed into the third generation of founders. The management ability of Chairman Choi Yoon-beom was unproven, and the shares were dispersed. The 'old versus new' conflict between the second generation of the Jang family and the third generation of the Choi family also surfaced externally. Seizing this opportunity, MBK Partners, a player in the capital market, claimed they could manage better and allied with the Jang family.

From the perspective of the capital market, it seemed strange that the stock price of Korea Zinc, the world’s number one, was weak. According to MBK, since Choi Yoon-beom became CEO in 2019, debt has surged and profitability has deteriorated. Korea Zinc’s debt increased 35-fold from 41 billion won in 2019, the year Choi took office, to 1.411 trillion won in the first half of this year.

Moreover, suspicious investment cases such as investments in the capital-deficient company Ignio Holdings, One Asia Partners, and allegations of market manipulation involving SM surfaced during the management dispute. Chairman Choi’s side explained that they had reviewed the appropriateness of investments during new business ventures and that there were no internal financial soundness issues.

Putting aside investment suspicions and management ability for now, Chairman Choi’s response after the Korea Zinc management dispute broke out has been quite disappointing. From the early stages of the dispute, allegations of investment breach of trust related to him became a core issue.

Instead of stepping forward to provide a convincing and detailed explanation, he led about 80 partner companies and technical executives to advocate for maintaining the current system. When regional politicians were nudged, fake news spread claiming MBK was a fund backed by Chinese capital and that Korea Zinc’s core technology could be leaked overseas.

The card Chairman Choi belatedly played was a somewhat embarrassing strategy to defend management rights by buying back up to 15.5% of the company’s shares with company funds. The over 2 trillion won of company money turned out to be high-interest loans, and the burden falls not on Chairman Choi or the white knight but on Korea Zinc itself. All the shares acquired this way are planned to be canceled. Thinking it was the real mother, it turns out to be the fake mother who insists on keeping the child even if it is halved.

From Chairman Choi’s perspective, it is frustrating and painful to give up management rights of Korea Zinc, which the Choi family has nurtured so well. It may be vexing that the world does not recognize the young CEO’s vision for new businesses. However, the current situation is the accumulated result of management decisions made by Chairman Choi and the Choi family at every critical juncture.

Objectively, Chairman Choi is a shareholder holding 1.84% and merely the CEO entrusted with managing Korea Zinc. No one has been granted the right to manage Korea Zinc, a listed company where shareholders hold rights proportional to their shares, forever.

If one wants to maintain firm management and decision-making authority without external disturbance, they should have secured a majority stake. If that is not possible, they should have explained, persuaded, and appealed to secure reliable friendly shareholders, even if it was difficult and inconvenient. If one wants to be recognized as a manager, they should have proven stock price, performance, and future value with numbers instead of suspicious investments.

Does Chairman Choi Yoon-beom have the qualifications to be the mother who nurtures the world’s number one Korea Zinc? It is time for the Solomon of the capital market (the shareholders) to make a judgment.