C&G Forum held its first regular seminar in Seoul on the 17th and discussed hostile mergers and acquisitions (M&A) and corporate governance issues under the theme of the Korea Zinc management control dispute, one of the biggest pending issues in the domestic capital market.
C&G Forum was launched to study corporate management control and governance issues and to seek ways to advance Korea's capital market, with participation from leading university faculty and experts in management, economics, and law. C&G is an abbreviation of "Control & Governance," meaning corporate management and governance.
Attending the seminar were Kim Min-gi, a professor at the KAIST Department of Management Engineering and chair of C&G Forum; Kim Hee-kyung, managing partner at Doyoung LLC; An Seong-jin, a professor at the Ewha Womans University School of Business; Yoo Hyo-sang, head of the Unicorn Management and Economics Research Institute; and Han Ju-hun, a professor at the KAIST Department of Management Engineering.
The discussions by experts in each field followed, starting with a presentation by Professor Han Ju-hun. Han cited conflicts of interest over dividend policy and new business investment strategy as the background to the conflict between Korea Zinc and Young Poong. Han said, "Since Chairman Choi Yoon-beom took office at Korea Zinc, investments have expanded around the 'troika drive' businesses focused on renewable energy and secondary battery materials, leading to changes in dividend policy and, with that as a turning point, the conflict between the two sides intensified in earnest."
Han went on to explain, "As various legal and management issues emerged, including a tender offer, cross-shareholding structures, voting right restrictions, and a paid-in capital increase involving the U.S. government, the case has expanded into a management control dispute rarely seen in the domestic capital market."
Professor An Seong-jin analyzed, "There is an aspect in which the conflict intensified as the short-term scale of dividends was partially adjusted while Korea Zinc focused on investments in new businesses." He added, "From a mid- to long-term perspective, strategic new business investments such as the troika drive can contribute much more to enhancing shareholder value," and emphasized, "When evaluating corporate value, it is necessary to consider not only current dividend income but also future growth potential and industrial spillover effects."
Professor Kim Min-gi said, "The Korea Zinc case should be viewed not just as an equity contest but also in terms of supply chain security and the advancement of the capital market," adding, "Judging the management control dispute of a national key industry responsible for rare metals and strategic mineral supply chains by the single criterion of maximizing short-term shareholder interests can undermine the long-term competitiveness of a core national industry." Kim also said, "The government and institutional investors should recognize that investor protection and national industrial competitiveness are complementary values and play a more responsible role."
Director Yoo Hyo-sang noted, "Private equity is an important market participant that generates investment returns by enhancing corporate value and strengthening industrial competitiveness, but hostile M&A surrounding national key industries requires a different level of discussion from typical investment cases," and pointed out, "A tender offer conducted without consultation with management and a prolonged management control conflict increase uncertainty in corporate management and can impose a considerable burden on the market and related industries."
Managing partner Kim Hee-kyung said, "This situation has continued for a long time and is incurring significant social expenses," adding, "The more legal battles arising from hostile M&A involving national key industries are repeated, the greater the expenses that corporations, investors, and the entire market will inevitably have to bear." She emphasized, "Major institutional investors, including the National Pension Service, need to play a more proactive and responsible role based on the stewardship code."
Starting with this seminar, C&G Forum plans to continue regular research and case studies on management control disputes at major corporations at home and abroad, governance restructuring, and governance issues in the process of transitioning to innovative industries.