At an extraordinary shareholders meeting on the 9th, Korea Zinc elected Baek In-gyu, a Dankook University professor backed by Chair Choi Yoon-beom, as an audit committee member by an overwhelming margin over Park Yoo-kyung, former head of responsible investment for Asia-Pacific at APG Asset Management, backed by MBK and Young Poong. With Choi's side gaining the upper hand in the key agenda item of electing an audit committee member, observers said Choi's camp has solidified its advantage on the Korea Zinc board.
With the extraordinary shareholders meeting, the board was reconstituted to 19 members: 12 aligned with Choi and 7 aligned with MBK and Young Poong. The previous board had 14 members: 9 aligned with Choi and 5 with Young Poong. Under cumulative voting, the four independent director seats were split two apiece, and Choi's side secured the one audit committee seat.
Baek won support from 5,092,815 shares out of 6,225,934 shares present. That is 81.8% of the votes cast. Park Yoo-kyung, the former APG Asset Management Asia-Pacific head of responsible investment recommended by MBK and Young Poong, received 1,739,065 votes (27.9%) and fell short. The two candidates' totals exceeded the number of shares present (100%) because the National Pension Service voted for both sides. The audit committee vote was conducted as item 3-1 (Professor Baek) and item 3-2 (Head Park).
For independent directors, Choi's side saw Lee Hyeong-gyu, an emeritus professor at Hanyang University Law School, and Seo Eun-suk, a professor in the Department of Economics and Finance at Sangmyung University, elected, while MBK and Young Poong saw Lee Jun-bong, a professor at Sungkyunkwan University Law School, and attorney Sim Hye-seop elected. The vote ranking was Sim Hye-seop, Lee Jun-bong, Lee Hyeong-gyu, and Seo Eun-suk.
Korea Zinc's separate election of an audit committee member marked the first real application in a control dispute of the revised Commercial Act's "combined 3% rule," which limits the total voting rights of the largest shareholder and related parties to 3%. Young Poong, the largest shareholder of Korea Zinc, and Chair Choi, an executive at Korea Zinc, were subject to the "3% rule" despite being in a management control dispute. As they supported different candidates, the permitted 3% voting rights were allocated pro rata based on their equity holdings.
MBK had an agreement with Young Poong to exercise voting rights jointly, but as they are only joint holders under the Financial Investment Services and Capital Markets Act and not related parties under the Commercial Act, MBK exercised up to a separate 3% of voting rights. Crucible JV, a key friendly shareholder for Choi's side, was also recognized to exercise up to 3% of voting rights for about 10% of its equity. The exercisable voting rights differed depending on whether they were related parties under the Commercial Act.
With large equity stakes on both sides of the control dispute constrained by the "3% rule," major shareholders such as Hanwha Group and LG Chem quickly emerged as swing voters. Hanwha Group holds 7.69% of Korea Zinc's equity through three affiliates—Hanwha H2 Energy, Hanwha Impact, and Hanwha Corp. If the 3% rule applied separately to each affiliate, they were expected to be able to exercise about 5.9% of voting rights. LG Chem also holds about 1.87% equity. This is why MBK sought to lock in late-breaking votes by sending letters requesting support for Park to Hanwha and LG Chem ahead of the meeting.
The National Pension Service holds about 5% equity. Although it initially said it would support Choi's side, it reversed course just before the meeting after convening its stewardship responsibility expert committee and decided to vote in favor of both sides.
Yoo Hyo-sang, a professor at the Unicorn Management and Economics Research Institute, said of the extraordinary meeting's outcome, "It reflects shareholders' voting intentions concerned that an aggressive merger and acquisition (M&A) by a private equity fund would transfer management control and throw the company into uncertainty," adding, "It is support for the current management, which has shown strong operating results so far, and an expectation for sustainable growth."
However, it is hard to interpret the extraordinary meeting's result as making Korea Zinc overwhelmingly favorable in the control dispute. That is because MBK and Young Poong, by securing two of the four independent directors elected through cumulative voting, expanded their board seats from 5 to 7. In terms of votes, MBK and Young Poong's candidates took first and second place. While Choi's side won the audit committee election, MBK and Young Poong still retained a check on the board. Choi's side increased its seats from 9 to 12, accounting for about 63% of the 19 total seats. That is little changed from the previous ratio of about 64%.
The first item processed was "articles of incorporation amendment to expand separately elected audit committee members," which increases the number of separately elected audit committee members from one (Seo Dae-won) to two. Under the revised Commercial Act and the Ministry of Justice's authoritative interpretation, large listed companies must have at least two separately elected audit committee members by the 10th of this month. This is why Korea Zinc convened the extraordinary shareholders meeting on the 9th, one day before the deadline. Korea Zinc also sought to expand separately elected audit committee members at its regular shareholders meeting in March, but it was voted down by MBK and Young Poong.
Meanwhile, Korea Zinc's extraordinary shareholders meeting opened at 10:25 a.m., about 25 minutes late, due to verification of duplicate proxies. The regular shareholders meeting in March was delayed by about three hours.