MBK "Choi Family's Excessive Compensation Accounts for 42% of Total Executive Pay"

It has been claimed that the compensation of executives from the Choi family at Korea Zinc and its affiliates was excessively set at an average of 42% of total executive compensation over five years.

MBK Partners stated in a press release on the 7th that after analyzing the business reports disclosed from 2019 to 2023 of Korea Zinc and its affiliates, executives from the Choi family (including Chairman Choi Yun-beom and the former chairman who is now honorary chairman) accounted for only 15% of all Korea Zinc executives, but the compensation they received approached 42% of the total executive compensation on average over five years.

When limited to registered executives, the number of registered executives from the Choi family over the past five years was only 20% of the total, but they received an average of 66% of the total compensation for all registered executives.

In 2022, the total compensation for the Choi family was 8.8 billion KRW, with the total compensation for two registered executives including Chairman Choi amounting to 4.3 billion KRW, and the compensation for four non-registered executives exceeding 4.4 billion KRW. Although the proportion of Choi family executives, including both registered and non-registered executives, was only 12%, their share of total executive compensation was 42%.

In 2019, the total compensation for the Choi family was 6.4 billion KRW, accounting for 51% of the total executive compensation.

MBK also viewed the increase rate of compensation for Chairman Choi Yun-beom and the honorary chairmen of the Choi family as abnormally excessive compared to the increase rate of other registered executives' compensation.

Chairman Choi's compensation increased from 1 billion KRW in 2021 to 1.959 billion KRW in 2022, and 3 billion KRW in 2023, with an average annual compensation growth rate of 73% over three years. For the two honorary chairmen of the Choi family, their compensation increased from 1.731 billion KRW and 1.667 billion KRW respectively in 2021 to 2.376 billion KRW and 2.222 billion KRW in 2022, representing increases of 37% and 33% respectively.

MBK commented, "Considering that Korea Zinc's return on equity (ROE), which reached 11.6% in 2021, dropped to 5.8% in 2023, and the return on assets (ROA), which was 9.5% in 2021, fell to 4.4% in 2023, the compensation of Korea Zinc executives, especially Chairman Choi and the two honorary chairmen of the Choi family, is not linked at all to the company's performance."

MBK estimated that the Choi family likely increased total compensation further by revising the regulations in 2023 to raise the executive retirement pay multiplier from 3 months to 4 months per year of service, and by newly adding a provision for honorary chairmen to receive retirement pay of 4 months per year of service, where previously no such payment rule existed.