At Korea Zinc's regular shareholders meeting, the dispute over the voting standard for cumulative voting intensified, sparking a fairness controversy. That was because Korea Zinc sought to proceed with the vote in a way different from the standard applied at last year's meeting.
At the heart of the dispute is how to handle overseas institutional investors' "under-voting" (exercising voting rights for only some candidates). In cumulative voting, voting rights are multiplied by the number of directors to be elected, but some foreign shareholders cast votes for only certain candidates, creating unexercised voting rights. The final tally can vary depending on whether those remaining voting rights are left as is or reallocated proportionally.
At last year's shareholders meeting, Korea Zinc reflected the Korea Securities Depository aggregation standard as is, recognizing only the votes actually cast and not reallocating unexercised voting rights separately. But for this meeting, the company said it would reverse its previous position and apply a "pro rata" method, treating the entire voting rights as exercised by including under-voted rights and then allocating them proportionally.
Young Poong strongly objected on site at the meeting. Young Poong said, "At the pre-inspection rules meeting, we agreed to reflect as is any under-voting among foreign voting rights submitted through the Korea Securities Depository, but the company abruptly changed its position," adding, "This overturns a standard already fixed and could be unlawful."
It added, "When a foreign shareholder casts a vote of approval only for a specific candidate, that is an expression of intent to exercise voting rights only for that candidate, and the rest should be considered an abstention," pointing out, "Reallocating this proportionally after the fact distorts shareholders' intent." Young Poong also said it believes the voting method in question could materially affect the outcome and that it could pursue legal action, including a motion to suspend duties.
Korea Zinc, by contrast, said this was an unavoidable step that takes into account the structural limits of foreign voting-rights exercise. A company attorney said, "In the case of foreign investors, the system cannot accurately allocate voting rights, creating the appearance that only a portion was exercised," adding, "This should be seen as a system defect rather than shareholders' intent."
Korea Zinc said it would submit to the inspector both the Korea Securities Depository tallies and the adjusted figures, and leave the final decision to the court. The company said, "We will proceed with the vote under the company's policy for now, but ultimately this can only be resolved based on the court's decision."
Industry watchers say the ripple effects could be significant because the dispute goes beyond interpretation and is a key variable that could determine the board's makeup. An industry official said, "In cumulative voting, victory or defeat can be decided by a margin of hundreds of votes, so the voting standard itself can change the result," adding, "Changing last year's standard depending on circumstances raises issues in terms of procedural consistency and the principle of shareholder equality."
Another official said, "It is up to the investor to exercise only part of their voting rights," adding, "Reinterpreting and reallocating them after the fact could undermine the purpose of exercising voting rights."