Positive View of Young Poong-MBK Shareholder Proposals
Criticism of Excessive Compensation for Honorary Chairmen
The Korea Corporate Governance Forum has given a positive assessment of the shareholder proposals put forward by Young Poong and MBK Partners ahead of Korea Zinc's annual general meeting. However, it argued that the temporary chair of the shareholders' meeting should be the chair of the board of directors rather than the company's CEO.
On the 26th, the Governance Forum issued a commentary to this effect. Earlier, Young Poong and MBK, which are engaged in a management control dispute with Korea Zinc Chairman Choi Yoon-bum's side, announced on the 12th that they had submitted shareholder proposals to the company aimed at normalizing its governance structure and restoring shareholder value ahead of next month's annual general meeting of shareholders. In response, on the 23rd, Korea Zinc's board of directors decided to accept most of the proposals, except for the appointment of a temporary chair and the introduction of an executive officer system, and to table them at the annual general meeting.
The Governance Forum commented, "We welcome the shareholder proposals from Young Poong and MBK that were sent to Korea Zinc and its board of directors, and we generally give a positive evaluation to the board's decision on the agenda for the 2026 annual general meeting," adding, "Although the board's view is that the proposal to appoint a temporary chair of the shareholders' meeting conflicts with the articles of incorporation, given that recent shareholders' meetings of the company have proceeded in a disorderly manner, it is more appropriate from the perspective of shareholder protection for the chair of the board, rather than the CEO, who faces a high potential for conflicts of interest, to serve as temporary chair."
The Governance Forum also argued that Chairman Choi's friendly shareholdings should be sold. Previously, in 2022, Korea Zinc's board approved cross-shareholdings with LG Group and Hanwha Group using treasury shares as a medium. Under the pretext of building a strategic partnership, Korea Zinc and LG Chem exchanged treasury shares worth 257.6 billion won in November 2022. LG Chem, whose financial structure has deteriorated, still holds a 2% stake in Korea Zinc. Hanwha affiliates also hold an 8% stake in Korea Zinc. In September 2023, HMG Global, a U.S. affiliate of Hyundai Motor Group, acquired a 5% stake in Korea Zinc through a third-party paid-in capital increase.
The Governance Forum stated, "The third amendment to the Commercial Act, which mandates the retirement of treasury shares, is intended to prevent infringements of shareholder rights that use treasury shares in this way," and demanded, "We hope that Hanwha Group Vice Chairman Kim Dong-kwan, LG Group Chairman Koo Kwang-mo, and Hyundai Motor Group Chairman Chung Euisun will sell in the market their respective 8%, 2%, and 5% stakes in Korea Zinc."
It also criticized a transaction carried out late last year when Korea Zinc pursued the construction of a smelter in the United States in cooperation with the U.S. government. At that time, as Korea Zinc pushed ahead with the U.S. smelter project, it announced a third-party paid-in capital increase of 1.9 billion dollars (about 2.85 trillion won) through the establishment of a joint venture in which the U.S. government would be a major shareholder. As a result, it judged that existing shareholders' stakes were diluted by 10.3%.
The Governance Forum pointed out, "Under directors' duty of loyalty to shareholders, when making major decisions such as investing in a U.S. smelter, the board must thoroughly review various possible alternatives through cash flow projections and financial analysis, and choose the option that maximizes proportional benefits to shareholders," and continued, "From the perspective of ordinary shareholders, it is difficult to accept the decision, because nowhere in Korea Zinc's disclosures or company materials is there any explanation that other alternatives, including the method mentioned above, were sufficiently compared and examined, or why the third-party paid-in capital increase option was chosen."
It also criticized what it described as excessive compensation for management, which is also included in the shareholder proposals from Young Poong and MBK. Honorary Chairman Choi Chang-young (81), the uncle of Chairman Choi, and Honorary Chairman Choi Chang-geun (79) recently received annual salaries of 1.23 billion won and 1.24 billion won, respectively. The Governance Forum argued, "It is abnormal that the compensation of the honorary chairmen in their 80s, who have stepped down from active management, exceeds the combined total compensation of 1.03 billion won for the 13 independent directors in 2025," and added, "It is also shocking that none of the three president-level directors (Park Gideok, Jung Taeung, and Jung Mookyung) hold any company shares at all, and therefore stock-based compensation should be introduced not only for company executives and employees but also for independent directors."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
