The attempt by MBK Partners and Youngpoong to seize control of Korea Zinc has been ongoing for nearly four months, with voices in the business community calling for effective measures to defend management rights suited to the realities of our country. Concerns have grown that large corporations could face hostile mergers and acquisitions (M&A) as the influence of private equity funds (PEF) increases.
On Dec. 12, the Financial Supervisory Service (FSS) held a meeting with the representatives of 12 private equity fund management companies dedicated to institutional investors. FSS Chairman Lee Bok-hyun mentioned the 'new separation of finance and industry' while emphasizing the need to strengthen the accountability and healthy role of private equity funds. The 'new separation of finance and industry' that Chairman Lee referred to involves considering whether it is beneficial for private equity funds, which typically invest for about five years and then withdraw their funds, to acquire corporations that require long-term management for enhancing shareholder value.
There are more negative reactions to attempts by private equity funds to engage in M&A. According to a survey conducted by the polling agency Realmeter from Jan. 18 to 19 among 1,004 males and females aged 18 and older, 52.1% expressed concern over the negative effects of industrial capital being dominated by financial capital, which is more than double the 23.2% who disagreed. When asked about responses to the M&A attempts by private equity funds, the most common solution mentioned was strengthening regulations (45%), followed by enhancing management rights defense measures (33.6%).
The business community also argues for the need for management rights defense measures. Currently, the management rights defense measures outlined in the securities market bylaws include ▲ supermajority voting system ▲ golden parachute ▲ director qualification limitations ▲ staggered term system. However, the supermajority voting system is not permitted under the Commercial Act as it violates the principle of equal treatment of shareholders. The golden parachute system has faced criticism as a system for the benefit of majority shareholders and existing management.
In this regard, alternatives such as dual-class voting rights and poison pills are being discussed. Dual-class voting rights refer to granting different voting ratios based on the type of shares. Poison pills are defensive measures that grant existing shareholders the right to purchase new shares at a lower price to deter hostile M&A attempts. Unlike Korea, the United States, Japan, and France have implemented both poison pills and dual-class voting rights as accepted means of defending corporate management rights.
A business insider noted, 'For corporations to pursue stable growth, it is essential to secure management rights reliably.'