ISS (Institutional Shareholder Services), one of the world's largest proxy advisory firms, recommended voting "against" the agenda item to reappoint Chair Choi Yun-beom as an inside director ahead of Korea Zinc's regular shareholders meeting on the 24th.
According to the investment banking (IB) industry on the 9th, ISS presented its views on director appointments and key items through its agenda analysis report for Korea Zinc's regular shareholders meeting that day.
ISS gave a favorable opinion on the agenda to elect five directors through cumulative voting. In that case, it recommended supporting the appointments of five candidates in total: Hwang Deok-nam, the board chair recommended by Korea Zinc; Walter Field McLellan, recommended by the U.S. Crucible JV as a candidate for other non-executive director; and Park Byung-uk, Choi Byung-il, and Lee Seon-suk, recommended by the Young Poong–MBK Partners consortium.
By contrast, it recommended voting against the agenda to appoint Chair Choi Yun-beom as a director. Choi was put forward at this regular shareholders meeting as a candidate for reappointment as an inside director with a two-year term.
In the report, ISS noted Korea Zinc's performance improvement and share price gains in recent years, while emphasizing the need to review governance issues. The point was that company funds and the equity structure were used as tools to defend Chair Choi's management control.
ISS also cited as examples the company's attempt to pursue a paid-in capital increase after a share buyback by Korea Zinc's management, the controversy over cross-shareholdings surrounding voting right restrictions on Young Poong, and the board deliberation procedures in the course of a large-scale strategic investment.
ISS further raised issues with the structure that applies the same four-times severance pay standard as the CEO to a non-registered honorary chair who bears no legal responsibility, and recommended supporting an amendment to revise the related rules. It judged that the fact that the two honorary chairs are family members of the sitting chair and the structure of large compensation paid to them are unlikely to align with global governance principles. Honorary Chairs Choi Chang-young and Choi Chang-geun are, respectively, the eldest and third sons of Korea Zinc founder Choi Ki-ho. In response to the company's claim that there is a past history of shareholder meeting approval, it drew a line by saying that approval itself does not automatically guarantee appropriateness.
ISS stressed that what is most needed at this point is the restoration of checks and balances. It judged that a balanced composition of directors with independence and expertise can restore investor confidence.
In the industry, there is a view that ISS's recommendation could influence the votes of investors classified as swing voters at the regular shareholders meeting.
The Young Poong–MBK Partners alliance holds a total of 42.1% of the voting equity, while Chair Choi's family and friendly shareholders Hanwha and LG Chem hold 27.9%. The U.S. JV has an equity stake of 10.8%, and the remaining roughly 19% belongs to swing voters such as the National Pension Service and foreign institutions. Among them, the National Pension Service is known to hold about 5%, and large foreign institutions hold around 4%. The remainder is held by domestic and overseas individual shareholders and other corporations.