SEOUL, South Korea, Jan. 23, 2025 /PRNewswire/ -- On January 23, Korea Zinc (KRX:010130) held an extraordinary general meeting (EGM) at Grand Hyatt Seoul to vote on eight agenda items proposed for amendments to the company's articles.
Korea Zinc Logo (PRNewsfoto/Korea Zinc)
Among these, six proposals were approved, including adoption of cumulative voting system, limiting the maximum board size, stock split, appointment of an independent director as a board chair, changing the record date for dividends and adoption of quarterly dividends.
However, the proposal to introduce an executive officer system, which was proposed by MBK Partners and Young Poong as part of their campaign to improve corporate governance, was rejected after the consortium voted against it, leading to failure to meet the special resolution requirement of needing approval from more than two-thirds of attending shareholders.
The proposal to stipulate the protection for minority shareholders also failed to pass due to opposition from MBK and Young Poong.
Approval of Cumulative Voting System and Limiting the Maximum Board Size Paves the Way for Strengthening Minority Shareholder Protection and Governance
The first item to pass was the amendment to the company's articles to introduce a cumulative voting system. Designed to protect the rights of minority shareholders, the 3% rule was applied, and the proposal was approved with over 70% of the votes from the shares present.
The cumulative voting system allows each shareholder to exercise voting rights equal to the number of directors to be elected per share owned. This system is praised for enhancing minority shareholder rights and promoting board diversity. It also serves as a check against dominant shareholders unilaterally influencing board elections, enabling minority shareholders to play a "casting vote" role in board composition. Advocacy groups for minority shareholders, civic organizations and some from politics have strongly supported the adoption of this system.
The proposal to cap the number of directors at 19 was also approved, improving board stability and efficiency. This aligns with recommendations from domestic and international proxy advisory firms, such as Glass Lewis, ISS and SUSTINVEST, laying the groundwork for a globally standardized board structure.
The proposal to appoint an independent director as the board chair also passed smoothly with strong support from attending shareholders. This is intended to strengthen governance independence by allowing an independent director to oversee the board, free from the influence of controlling shareholders.
Proposals to adopt quarterly dividends and change the record date for dividends were also voted in favor. In addition to interim dividends, the company plans to return profits regularly to shareholders by paying quarterly dividends – at the end of March, June and September. The record date for dividends was also revised to enable investors to confirm dividend amounts in advance when making investment decisions.
Stock split marks another significant change. The proposal involves reducing the par value per share from KRW 5,000 to KRW 500, a tenth of the original value. This will increase the number of shares in circulation and is expected to expand investment opportunities for minority investors.
Board Members with Expertise and Independence Get Newly Appointed, Enhancing Management Transparency and diversity
The EGM also voted to appoint new board members. Previously on the 21st, the court had granted Young Poong's injunction request to prohibit the proposal of appointing directors via a cumulative voting system at Korea Zinc's EGM on the 23rd, and as a result the proposal was proceeded based on ordinary resolution requirements with a presupposition that the number of board members had been capped at 19.
As a result of this vote, all seven independent director candidates recommended by Korea Zinc were newly appointed. The new board members include Sanghoon Sam Lee, former representative of Affinity Equity Partners in Korea; Hyeong-Kyu Lee, emeritus professor at Hanyang University Law School; Kyeongwon Kim, dean and professor at Sejong University's College of Business and Economics; James Andrew Murphy, senior advisor at Oliver Wyman; Tammy Chung, dean of the College of Business at Myongji University; Jaiyong Lee, emeritus professor at Yonsei University's Department of Electrical and Electronic Engineering; and Jaesik Choi, professor at Korea Advanced Institute of Science and Technology (KAIST) Graduate School of AI.
All 14 independent director candidates recommended by MBK and Young Poong failed to secure a majority vote.
A Korea Zinc representative stated, "Many domestic and international proxy advisory firms, as well as many of our shareholders, including the National Pension Service, have made wise recommendations and decisions after deliberating over Korea Zinc's importance in the national economy, especially as a key player in core national technologies and advanced strategic industries. Using this EGM as a jumping-off point, all employees and executives of Korea Zinc will strive to meet the support of our shareholders."
Young Poong's voting rights for the Korea Zinc shares they own were restricted at this EGM.
The day before the EGM on the 22nd, Sun Metals Corporation (SMC), a subsidiary of Korea Zinc, acquired some of Young Poong's shares held by Young Poong Precision and the Choi family, citing stable business operations and reasonable pricing as the basis for the acquisition. Notably, SMC acquired shares from the Choi family at a 30% discount from the closing price on the 21st, which provided SMC with significant financial gain. In contrast, the Choi family gave up a considerable portion of potential profit from the sale. The number of Young Poong shares newly acquired by SMC amounts to about 10.3% of Young Poong's total issued shares, and according to the Commercial Act of Korea (Articles 369 (3) and 342-2 (3)), this means that Young Poong does not have voting rights for the shares of Korea Zinc that it holds.
A large number of Korea Zinc labor union members gathered at the venue where the EGM was being held. The union members united under the shared mission of protecting a national key industry, appealing for shareholder support through an orderly protest with placards.
Korea Zinc, along with its labor union, key technical team and all of its employees, has been working together to protect the company, a core pillar of the nation's key industry, and prevent the outflow of national core technologies, national high-tech strategic technologies and national strategic technologies to overseas entities. They have made full efforts to safeguard against serious concerns over employment insecurity, such as layoffs, restructuring and asset sales, which they deemed could potentially arise in the future.
Korea Zinc emphasized that all members of the company are open to discussions and cooperation with MBK if it aligns with the company's growth and development. The company believes that coexistence, cooperation and achieving a great compromise are the best path forward for everyone involved. The company also emphasized its willingness to keep all options open and engage in dialogue at any time and has called for the cooperation and support of various stakeholders in reaching this goal.
Korea Zinc's current management and employees believe that if MBK Partners can build mutual trust as a reputable and prestigious private equity firm capable of collaborating for the benefit of Korea Zinc, it could become a valuable partner in the company's journey toward becoming a national enterprise.
In relation to recent developments, Korea Zinc's management will be holding a press conference on January 24 at Grand Hyatt Seoul, the same location where the EGM was held a day prior. They plan to provide their stance on various recent issues, including the results of the EGM, and conduct a Q&A session.
