The board of directors of Korea Zinc disclosed the agenda for the extraordinary shareholders' meeting to be held next month on the 23rd, while the MBK Partners-Yongpoong Alliance criticized Chairman Choi Yoon-beom for allegedly abusing the cumulative voting system. It was claimed that Chairman Choi resorted to tricks to maintain his position as chairman as he found himself in a disadvantaged situation during the voting.
On the 23rd, Chairman Choi's camp announced that they held a board meeting and finalized the agenda for the extraordinary shareholders' meeting. The proposal that MBK Partners raised concerns about is Proposal No. 1. Shareholders aligned with Chairman Choi, Yumi Development, presented a proposal to amend the articles of incorporation to introduce a cumulative voting system as Proposal No. 1.
The cumulative voting system is a voting method that grants voting rights equivalent to the number of directors one wishes to elect per share. In cases where there are multiple director candidates, the given voting rights can be concentrated on one or several candidates. When directors are elected by a simple voting method, all directors are appointed according to the will of the majority shareholder who holds more than half of the shares. However, by utilizing the cumulative voting method, minority shareholders can concentrate their voting rights to elect the directors they recommend, thus preventing all directors from being appointed solely according to the will of the majority shareholder.
It is interpreted that Chairman Choi's camp resorted to the cumulative voting strategy because they are at a disadvantage in terms of voting rights compared to MBK-Yongpoong. As of now, MBK-Yongpoong holds 46.7% of the voting rights, while Chairman Choi's camp is estimated to have around 40%, including friendly shares.
MBK Partners pointed out, "If the election of directors is conducted using the cumulative voting method at Korea Zinc's extraordinary shareholders' meeting, it may prevent MBK-Yongpoong from electing a majority on the board by concentrating the voting rights of Chairman Choi's camp on the directors recommended by Chairman Choi's camp."
They further claimed, "In that case, it could delay the dissolution of the board structure centered around Chairman Choi, hindering the correction of governance at Korea Zinc, and during that period, the power struggle among shareholders could continue, causing harm to both Korea Zinc and its shareholders."
MBK Partners pointed out that Chairman Choi, despite not being a minority shareholder, is attempting to leverage the cumulative voting system to his maximum advantage. A company official said, "This is similar to past cases where, while superficially advocating for shareholder protection, it effectively amounts to abusing the system for the purpose of maintaining one's management rights," asserting that "this is yet another instance of using the measures meant to protect minority shareholders as a trick for Chairman Choi’s personal management rights defense."
Currently, the articles of incorporation of Korea Zinc explicitly exclude the cumulative voting system. In large companies like Korea Zinc, when amending the articles of incorporation regarding the cumulative voting system, a so-called '3% rule' applies, which limits the exercise of voting rights to only 3% of the total issued shares with voting rights, similar to when appointing auditors or audit committee members; this could result in a relatively higher voting right for Chairman Choi's camp due to the division of equity among related parties.
An MBK Partners official emphasized, "While introducing a cumulative voting system to protect minority shareholders is generally a desirable direction, in this case, it is a shareholder proposal made with the intent of creating an advantageous situation for the second-largest shareholder amidst a power struggle between the first and second-largest shareholders, which is bound to elicit a negative response."
Additionally, MBK Partners raised concerns about Yumi Development proposing to implement the cumulative voting system for the election of directors at this extraordinary shareholders' meeting. According to company law, such shareholder proposals are only permitted when the cumulative voting system is recognized in the articles of incorporation, and in the current situation where the cumulative voting system is excluded from Korea Zinc's articles of incorporation, the shareholder proposal for officer election under the cumulative voting system itself is considered invalid.
Other minority shareholders claimed that they were unaware of the introduction of the cumulative voting system, arguing that they have been deprived of their opportunity to exercise their right to recommend director candidates, which they might have exercised if they had known that the cumulative voting system would be applied.
An MBK Partners official stated, "Even if the articles of incorporation are amended in the direction of introducing the cumulative voting system through this extraordinary shareholders' meeting, it is appropriate for the selection of directors under the cumulative voting system to be carried out starting from the next shareholders' meeting in terms of resolving legal issues and ensuring opportunities for participation of minority shareholders."