Youngpoong and MBK: "Susteen Best’s Opposition to Director Appointment Is a Clear Contradiction"

Rebuttal Against Recommendation to Support Baek Inkyu and Oppose Park Yukyung

“Ignoring Fundamental Differences in the Candidate Selection Process”

“Overlooking the Essential Role of the Audit Committee”

On August 20, ahead of the extraordinary general shareholders' meeting of Korea Zinc scheduled for September 9, Young Poong and MBK Partners directly countered on this date the recommendation made by proxy advisory firm Sustinvest, which had advised against their candidate for Korea Zinc's audit committee.

In a previous report, Sustinvest concluded that “maintaining the continuity of the current management structure aligned more closely with the long-term interests of all shareholders,” thereby supporting Baek Inkyu, the candidate recommended by the company. Regarding the candidate put forward by Young Poong and MBK Partners, Park Yu Kyung, Sustinvest asserted that “her accounting and audit expertise was relatively lacking.” Proxy advisory firms provide institutional investors with recommendations on how to vote on agenda items at general meetings.

On the same day, Young Poong and MBK Partners issued a statement arguing, “An audit committee member does not exist to support the continuity of the current management structure, but to independently monitor and check that the management structure operates properly.” Their remarks directly challenged Sustinvest’s three evaluation criteria: independence, expertise, and continuity.

“Are Candidates from a Public Nomination Process and Those Proposed by Management the Same?”

Sustinvest stated that neither candidate had circumstances casting doubt on their independence from management or controlling shareholders, and thus there was no significant difference in independence between them.

However, Young Poong and MBK Partners highlighted that the two candidates were nominated through different processes. In Korea Zinc's public nomination process, no candidates were put forward, so the board recommended Baek at the suggestion of management. In contrast, Park was selected through a public nomination process open to shareholders, corporate governance institutions, academia, and NGOs, and was then independently reviewed by an external panel with no connection to either side.

Young Poong and MBK Partners commented, “If Sustinvest judged there to be 'no significant difference in independence' between the two candidates, we must question on what basis Sustinvest assessed substantive independence,” emphasizing, “The independence of the audit committee begins with an independent selection process.”

“Judging Expertise Solely by Accounting Credentials Is Too Narrow”

Sustinvest evaluated Baek as having professional expertise directly relevant to the core duties of the audit committee—such as financial reporting, accounting treatment, and internal controls—based on his long career as a certified public accountant at Deloitte Anjin.

In response, Young Poong and MBK Partners countered, “An audit committee member is not an external auditor hired merely to examine the company's books.” They explained that the audit committee is a core body within the board that oversees not just accounting, but also management’s execution of duties, major investments and capital allocation, as well as conflict-of-interest and risk management.

Regarding Park, they noted her 17-year tenure at Dutch pension fund APG, where she oversaw responsible investment and corporate governance in the Asia-Pacific region, directly engaging in issues related to board independence, capital allocation, and shareholder rights. They also highlighted her work with the Korean Stewardship Code Committee and the ESG Committee of the National Pension Service.

Young Poong and MBK Partners asserted, “Granting Baek advantage in expertise simply because of the ‘directness’ of his accounting and audit career is vulnerable to criticism for reducing the audit committee’s role to a mere accounting audit function.”

“Is Continuity of Management Really a Criterion When Selecting Someone to Oversee Management?”

Young Poong and MBK Partners were most critical of the emphasis on “continuity of the current management structure.” The separate election of audit committee members is a system under which at least one audit committee member is elected independently from other directors, with the voting rights of large shareholders capped at 3%. This system was introduced to limit the influence of management and controlling shareholders and to reflect the voice of minority shareholders in board oversight.

Young Poong and MBK Partners pointed out, “When appointing audit committee members who are tasked with monitoring management independently, using ‘continuity of the current management structure’ as a selection criterion fundamentally contradicts the purpose of the system.” Although Sustinvest stated that “maintaining continuity and improving governance are separate issues,” the group argued that in practice, Sustinvest used continuity as a primary consideration in candidate selection, a logic they described as “difficult to reconcile.”

They also cited ongoing investigations and sanctions by regulatory authorities regarding Korea Zinc’s accounting practices and internal controls as additional grounds. Young Poong and MBK Partners stated, “What is currently needed is not an audit committee member who will support the continuity of the management structure, but one who can oversee the management structure even more independently.”

Young Poong and MBK Partners called on Sustinvest to transparently explain to the market and clients the standards by which they evaluated the independence and expertise of the two candidates, whether they considered the candidate selection process, and the grounds for including continuity in their assessment.

They continued, “If Sustinvest is a proxy advisory firm that values corporate governance improvement and protection of shareholder rights, its starting point should not be a conclusion about the ‘continuity of the current management structure,’ but rather a reconsideration of why the separate election system for audit committee members exists in the first place.”

This content was produced with the assistance of AI translation services.