[Initial Perspective] Korea Zinc, a Time to Minimize Losses Needed

"Senior technical staff at Korea Zinc would make more money if they left and started consulting firms."

This is what a company insider said, describing the recent serious unrest among Korea Zinc employees. As the management dispute at Korea Zinc, the world's No.1 non-ferrous metals company, drags on, the company's standing is being shaken.

Can the outcome of the Korea Zinc management dispute, which has continued for the past four months, really be decided at the upcoming extraordinary shareholders' meeting on the 23rd? The management dispute, which began in earnest last year with the public tender offer by the Yeongpung-MBK alliance, has extended into the new year with mutual lawsuits and smear campaigns.

In particular, the management dispute has materialized as a legal risk for the current management. Recently, financial authorities detected allegations of unfair trading related to the paid-in capital increase executed by Chairman Choi Yoon-beom and other executives during the management dispute and referred the case to the prosecution as a fast-track (expedited investigation) matter.

In fact, the Korea Zinc management dispute can be seen as an unavoidable event. On the surface, it appears to be a dispute between the largest and second-largest shareholders. The idea of a beautiful co-management spanning three generations is close to an illusion. If we look for causes in the overall market structure, it can also be interpreted as a transitional clash in the Korean capital market, which has rapidly developed based on the autocratic power of the family head in Korean industry and management, and is now moving toward shareholder- and stakeholder-centered capitalism.

Until now, Korea Zinc also faced the common problems of most Korean listed companies, where employees and the board of directors could not raise issues against the irrational decisions of the family head, and minority shareholder rights were weak. Suspicions related to large-scale investment decisions by third-generation CEO Chairman Choi Yoon-beom surfaced during the management dispute, and the authorities now see the need to determine the legality of decisions made to defend management rights. The truth of various allegations will be revealed through investigations by authorities and prosecutors. This can also be seen as a necessary process to strengthen Korea Zinc's management transparency. However, the prolonged instability of management rights can pose risks in terms of corporate competitiveness and human resource management.

The outline of the current management dispute has become somewhat clear. In the shareholding competition, the MBK-Yeongpung alliance holds the advantage. Based on voting shares, the MBK-Yeongpung side holds 46.69%, while the Choi family holds 19.97%. Even when including shares held by friendly shareholders such as Hyundai Motor and Hanwha, the total is 39.17%, which is still behind MBK-Yeongpung. The upcoming shareholders' meeting will hinge on director appointments. Under the current shareholding structure, if conducted by general voting, all 14 directors proposed by MBK-Yeongpung are likely to be appointed. If the cumulative voting system advocated by Chairman Choi is introduced, the number of directors recommended by the Choi family and those recommended by MBK-Yeongpung will be similar, likely prolonging the management dispute. Prolonged disputes can cause harm not only to the parties involved but also to employees, minority shareholders, and various stakeholders. At present, both Chairman Choi's side and MBK-Yeongpung are engaged in a fight neither can back down from, with a stance of "going to the end." Whichever side gains control, both must keep in mind minimizing the tangible and intangible losses to Korea Zinc, a major asset of our economy.