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Korea Zinc seeks edge in management war with shareholder voting scheme

Published: 26 Dec. 2024, 18:25

SARAH CHEA
[email protected]

Korea Zinc Chairman Choi Yun-beom speaks during a press conference held in central Seoul on Nov. 13. [NEWS1]

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Ahead of Korea Zinc’s shareholder meeting set for next month, the company drew an ace from its sleeve with the implementation of a voting system favorable to minority shareholders that can possibly aid Chairman Choi Yun-beom in the ongoing brutal management conflict with the MBK Partners-Young Poong coalition.

Korea Zinc on Monday put a “cumulative voting" system on the shareholder meeting agenda scheduled for Jan. 23, a move likely to protect Choi's management rights as he is losing in the stake race against the MBK alliance.

Choi showed his confidence through a message to Korea Zinc employees on Dec. 20, saying that he "is fully prepared by predicting the opponent’s movements in advance,” and he will “surely head off the hostile merger and secure victory.”

Choi and his allies reportedly possess up to 40 percent of the world's largest zinc smelter, while the MBK-Young Poong coalition outstrips them with some 46.7 percent.

The chairman is pushing for cumulative voting, which allows shareholders to cast all of their votes for a single nominee for the board of directors when the company has multiple openings, in contrast to a regular voting system that restricts shareholders from giving more than one vote to a single candidate.

Korea Zinc Chief Technical Officer and Vice Chairman Lee Je-joong, center, chants along with key engineers of the zinc smelter, during a press conference held at Korea Zinc's headquarters in central Seoul on Sept. 24. [NEWS1]

The voting scheme is known to be advantageous to minority shareholders as a means of voting for their preferred directors in a bid to hold the largest shareholder in check, which means that even with the MBK team's majority stake, it won’t be able to secure a majority in the board of directors.

Under the “3 percent rule” of the Korean Commercial Act, shareholders with more than 3 percent of shares are limited to voting power up to that percentage, seriously reining in Young Poong at 24.42 percent and MBK at 7.82 percent.

Choi’s allies have smaller stakes, which means they aren't subject to the restriction from the law.

Korea Zinc also put on the agenda a move to limit the number of board members to 19 in the planned shareholder meeting. The company currently has 13 directors, 12 of them considered Choi’s allies. It intends to block MBK’s plan to newly appoint 14 directors to the board.

The MBK-Young Poong alliance immediately issued a statement criticizing the smelter's agenda, arguing that it is a “trick” by the chairman to “abuse his power.”

“Choi pretends to protect small shareholders' rights, but it’s no different from his intention to abuse the system to maintain his management rights,” the coalition said in the statement.

Choi’s side is also pointing to the nationality of MBK Partners as a potential risk to national competitiveness in critical industry sectors.

Under Korea’s industrial technology protection law, a foreign company that acquires the management rights of a company that holds core national technologies must receive approval from the Ministry of Trade, Industry and Energy. Korea Zinc’s precursor manufacturing and refining technologies were recently designated key national technologies and it is also proceeding to gain additional designations with its two refining technologies.

Around 33 percent of shareholders of MBK Partners are reportedly foreigners including Chairman Kim Byung-ju, Vice Chairman Bu Jay and Chief Operating Officer Min Byung-suk, all of whom are U.S. citizens.

MBK once pulled out of an attempt to acquire Asiana Airlines, and the Land Ministry expressed disapproval due to the fact that major executives at the private equity firm have non-Korean nationality, according to multiple local reports.

The private equity firm dismissed the controversy, saying in a statement that “the foreign executives are from MBK Partners Hong Kong and have no relation or right to be included in the investment in Korea Zinc."

BY SARAH CHEA [[email protected]]