Korea Zinc Proposes Agenda Including Cumulative Voting... MBK Claims "Intent to Prolong Dispute"

Vote Battle Over Management Rights Between Yeongpung·MBK Alliance

Korea Zinc, which is currently in a management rights dispute with the Yeongpung·MBK Partners (MBK) alliance, will address agenda items such as the introduction of a cumulative voting system and a cap of 19 directors on the board at the extraordinary general meeting of shareholders scheduled for the 23rd of next month. At this extraordinary general meeting, Korea Zinc and the Yeongpung·MBK alliance are expected to engage in a vote battle over management rights.

Choi Yoon-beom, Chairman of Korea Zinc, is speaking at a Korea Zinc press conference held on the 13th at the Korea Chamber of Commerce and Industry in Jung-gu, Seoul. On this day, Chairman Choi stated, "I will step down from the position of chairman of the board as soon as possible, and an outside director will take over as chairman of the Korea Zinc board." Photo by Kim Hyun-min

According to the Financial Supervisory Service's electronic disclosure system on the 23rd, Korea Zinc held an extraordinary board meeting on the same day and resolved to put forward agenda items that include strengthening the rights and protections of minority shareholders at the extraordinary general meeting. The agenda includes appointing an outside director as the chairperson of the board, establishing minority shareholder protection regulations, introducing quarterly dividends, and splitting the par value of issued shares.

Earlier, Chairman Choi Yoon-beom of Korea Zinc stated at a press conference last month regarding the withdrawal of a rights offering that he would step down from the chairmanship of the board and strengthen the board's independence. The proposal to set the maximum number of directors on the board at 19 and the introduction of a cumulative voting system proposed by the shareholder 'Yumi Development' will also be discussed at the extraordinary general meeting. Korea Zinc explained, "Considering that the cumulative voting system is recognized under the Commercial Act as a representative 'minority shareholder rights protection measure' to prevent minority shareholders' voting rights from becoming wasted votes, we have decided to actively accept it."

In particular, Korea Zinc explained that the cap on the number of directors is an unavoidable measure to ensure the stability and efficiency of board operations. After comprehensively reviewing the appropriate number of directors for listed companies recommended by the global proxy advisory firm Glass Lewis, which is 'less than 20,' and the ISS standards, Korea Zinc decided to propose an amendment to the articles of incorporation to set a 'cap on the number of directors' to resolve problems that may arise when the number of directors is either too few or too many.

Currently, the Korea Zinc board consists of 13 members, and this is interpreted as a defensive measure against the Yeongpung·MBK alliance's demand to appoint 14 new directors. Korea Zinc stated, "If all candidates proposed by the Yeongpung·MBK side are appointed, the board membership will increase to a total of 27, resulting in an unprecedentedly 'large and inefficient board.' Therefore, it is necessary to establish a 'cap on the number of directors' of up to 19 members in the articles of incorporation as an agenda item for the extraordinary general meeting."

Korea Zinc also put forward an agenda item to appoint additional outside directors, including foreign experts, financial experts, and crisis management experts, in line with global standards, and to recommend a female outside director. The agenda to upgrade the Sustainability Management Committee, which was operated as an advisory body to the CEO with two outside directors, to an 'ESG Committee' under the board of directors in accordance with the Commercial Act will also be discussed.

The establishment of minority shareholder protection regulations, the introduction of quarterly dividends, and the agenda for splitting the par value of issued shares were also finalized. Quarterly dividends will be implemented in addition to the currently practiced interim dividends, based on the end of March, June, and September. The agenda for splitting the par value of issued shares was proposed by the Yeongpung·MBK alliance, pointing out recent issues such as Korea Zinc's stock price and lack of trading volume. The agenda items proposed by MBK·Yeongpung, including the introduction of an executive officer system and the appointment of 14 directors, will also be submitted. The Korea Zinc board stated, "We are willing to accept any agenda that benefits the company and shareholders."

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MBK·Yeongpung issued a press release criticizing, "Chairman Choi Yoon-beom, who is at a disadvantage in the vote battle, is trying to exploit the cumulative voting system to prolong the shareholder dispute and somehow preserve his position." They also pointed out, "If directors are appointed through the cumulative voting system, Chairman Choi's voting rights can be concentrated on the directors he recommends, preventing MBK·Yeongpung from appointing a majority of the board."

According to Article 542-7 of the Commercial Act, if a listed company with total assets exceeding 2 trillion won changes its articles of incorporation to exclude the cumulative voting system, shareholders holding more than 3% of shares cannot exercise voting rights on the excess portion. The agenda to introduce the cumulative voting system at Korea Zinc was proposed by Yumi Development, not the board. Yumi Development is a company in which the Choi family holds more than 88% of the shares.

When voting on the cumulative voting system agenda, Yeongpung (24.42%) and MBK (7.82%) can each exercise voting rights up to a maximum of 3%. The voting rights of Chairman Choi's side, whose shares are more fragmented among related parties and friendly forces, relatively increase. Furthermore, proposing to introduce the cumulative voting system and simultaneously appoint directors through it is likely legally impermissible, and from the minority shareholders' perspective, this agenda deprives them of the opportunity to recommend director candidates, which they might have exercised had they known the cumulative voting system would apply. Therefore, the Yeongpung·MBK alliance argues that this agenda is merely an attempt by Chairman Choi to extend his personal management rights.

MBK stated, "Even if the articles of incorporation are amended to introduce the cumulative voting system through this extraordinary general meeting, director appointments under the cumulative voting system should be implemented from the next general meeting to resolve legal issues and ensure minority shareholders' participation opportunities," adding, "Chairman Choi's shareholder proposal proves to be an agenda solely for Chairman Choi, ignoring the rights and values of other shareholders."