Korea Zinc Shareholders’ Meeting Showdown Today... Outcome Hinges on One Audit Committee Seat and the 3% Rule

High Probability All Four Independent Directors Will Be Elected... Key Battleground Is Audit Committee Seat
Inkyu Baek's 'Expertise' vs. Yukyung Park's 'Independence'
3% Rule Complicates Vote Calculation... Major Shareholders Like Hanwha as Variables

The faction led by Yoonbum Choi, Chairman of Korea Zinc, and the alliance between Young Poong and MBK Partners will once again face off in a vote at the extraordinary general meeting of shareholders on September 9. Four independent directors to be appointed by cumulative voting have two nominees from each side, making it likely all four will be elected to the board. The crucial battleground in this management dispute is the single independent director seat who will serve as an audit committee member. For this appointment, the revised Commercial Act’s 3% rule will apply, making the votes of institutional investors, foreigners, and minority shareholders the deciding factors.

Korea Zinc will hold an extraordinary shareholders' meeting at 10:00 a.m. on September 9 at the Mondrian Hotel in Yongsan-gu, Seoul, processing three agenda items: ▲amending the articles of incorporation to expand the number of separately elected audit committee members; ▲appointing four independent directors through cumulative voting; and ▲appointing one independent director to serve as an audit committee member.

The first agenda item is a revision of the articles of incorporation to increase the number of separately elected audit committee members. From September 10, listed companies with total assets over KRW 2 trillion are required to increase the number of audit committee members elected separately from other board members from one to at least two. At the regular shareholders’ meeting last March, a similar amendment proposal was rejected, but this time both Korea Zinc and the Young Poong·MBK alliance are in favor.

High Probability All Four Independent Directors Will Be Elected... Key Battleground Is 'One Audit Committee Seat'

The candidates for the four independent director positions are: Hyoungkyu Lee, emeritus professor at Hanyang University School of Law; Eunsook Suh, professor at Sangmyung University School of Economics and Finance; Junbong Lee, professor at Sungkyunkwan University School of Law; and Hyesub Sim, attorney. Among them, Hyoungkyu Lee was nominated by Yoomi Development, considered an ally of Chairman Choi. Professor Suh was recommended by Korea Zinc’s board. Junbong Lee and Hyesub Sim were nominated by Young Poong, YPC (Young Poong’s subsidiary), and Korea Corporate Investment Holdings.

The cumulative voting system applies to the election of these four directors. Since each side has nominated two candidates and the number of candidates matches the number of seats, unless unexpected variables intervene, it is highly likely that all four candidates will be elected.

Currently, the Korea Zinc board consists of 14 directors: nine aligned with Chairman Choi’s faction and five aligned with the Young Poong·MBK faction.

The outcome is expected to be determined by the single audit committee seat. Korea Zinc’s board has nominated Inkyu Baek, professor at Dankook University’s Department of Data Knowledge Service Engineering, while Young Poong·MBK has put forward Yukyung Park, former Head of Responsible Investment and Governance for Asia-Pacific at APG Asset Management.

Inkyu Baek's 'Expertise' vs. Yukyung Park's 'Independence'

Choi Yunbeom, Chairman of Korea Zinc. Photo by Yonhap News

Korea Zinc emphasizes Mr. Baek’s professional expertise in accounting, auditing, and internal control. He holds both Korean and U.S. CPA certifications and served as chairman of the board at Deloitte Korea and head of the ESG Center, among other roles.

Young Poong·MBK highlights Park’s independence. They explain that after an open call for nominations among all shareholders holding at least one share and governance experts, Ms. Park was selected via a three-stage screening by an independent candidate review committee composed of external experts independent from both the company and Young Poong·MBK.

A representative from Young Poong·MBK stated, "This is the first case in the domestic capital market where an audit committee candidate for a listed company has been publicly recruited by shareholders and verified/selected by an external independent body."

Young Poong·MBK raises concerns about Mr. Baek’s nomination, arguing it is problematic that the current board, which has supported Chairman Choi’s management defense strategies (such as treasury stock tender offers and general public offerings for capital increases) during the dispute, also recommended the audit committee candidate—thus undermining true independence.

Young Poong·MBK further claims that the very act of the current board nominating an audit committee candidate creates an issue of independence. Issues such as investment from One Asia Partners, acquisition of Ignio Holdings, and suspicions related to capital increases are likely to be later reviewed by the audit committee. Allowing the current board to nominate audit committee candidates could undermine the effectiveness and legitimacy of the audit process.

In contrast, Korea Zinc emphasizes that most proxy advisory firms have supported Mr. Baek. A Korea Zinc representative stated, "Most proxy advisory firms have not accepted the argument that the oversight function of the audit committee would be problematic."

According to counts by Korea Zinc, eight out of nine domestic and international proxy advisory firms that include ISS and Glass Lewis have recommended voting in favor of Mr. Baek. Korea ESG Standards Institute (KCGS) supported Ms. Park.

3% Rule Complicates Vote Calculation... Hanwha’s Vote Is Another Variable

In January last year, shareholders of Korea Zinc were lined up to enter the shareholders' meeting room at the Grand Hyatt Seoul in Jung-gu, Seoul, where the Korea Zinc extraordinary shareholders' meeting was held. Photo by Jo Yongjun

The other key variable in the audit committee vote is the 3% rule. Under the amended Commercial Act, when appointing audit committee members, shareholders holding more than 3% of shares cannot exercise voting rights on the excess. For the largest shareholder, the 3% limit also applies to shares held by certain related parties as defined by law.

The critical issue is how broadly to define related parties. Currently, Korea Zinc’s largest shareholder is YPC (a 100% subsidiary of Young Poong), which holds a 25.21% stake. On the MBK side, Korea Corporate Investment Holdings owns 8.25%. Although Young Poong and MBK have agreed to jointly exercise voting rights, under the Capital Markets Act, joint ownership and related parties under the Commercial Act are considered separately.

If Korea Corporate Investment Holdings is not included as a related party to YPC under the Commercial Act, it will not be combined with YPC’s stake, allowing it to exercise up to 3% of votes independently.

Conversely, if the scope of related parties under the Commercial Act is applied, executive directors of Korea Zinc, such as Chairman Choi (part of Young Poong’s corporate group), would be included as related parties to YPC and the combined 3% limit would apply. Chairman Choi’s side opposes this interpretation, arguing that the ongoing management dispute with Young Poong·MBK and their separate public disclosures warrant a different view. Ultimately, the valid voting rights that each side can exercise may vary significantly depending on how the scope for aggregation is defined.

Both parties agree that the 419,082 shares of Korea Zinc held by Chairman Choi’s special purpose company (SPC), P23 Partners, are subject to the combined 3% rule.

With the 3% rule limiting major shareholders’ voting rights, votes from other key shareholders have become relatively more important. Hanwha Group, through its subsidiaries Hanwha H2 Energy, Hanwha Impact, and Hanwha, holds a combined 7.69% stake in Korea Zinc. If the 3% rule is applied to each subsidiary individually, Hanwha could exercise about 5.9% of votes, making it a major variable in the audit committee vote.

The National Pension Service (NPS), which holds 5.48% of shares, has not supported either side. On September 7, its Stewardship Responsibility Expert Committee decided to allocate its cumulative voting rights equally among the four independent director candidates and to vote in favor of both Mr. Baek and Ms. Park as audit committee members.

If all four independent directors are elected, and Mr. Baek is appointed as audit committee member, the board will have 12 directors aligned with Chairman Choi and seven with Young Poong·MBK. If Ms. Park wins, the ratio will narrow to 11-to-8.

It is unlikely that this shareholders' meeting will resolve the management dispute. As the terms of several directors are set to expire at the regular shareholders' meeting next year, the battle for board control between the two sides is expected to continue.

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