7 Advisory Firms Recommend Maintaining Current Management

Three days ahead of Korea Zinc's regular shareholders meeting, seven major domestic and international proxy advisory firms have thrown their weight behind maintaining the current management structure. Glass Lewis, ISS, Sustinvest, Korea Corporate Governance Service ESG Research Institute, Korea ESG Standards Institute, Korea Corporate Governance Forum, and Korea Institute of Corporate Governance and Sustainability all recommended voting in favor of Korea Zinc's proposal to appoint five directors. Conversely, all seven firms opposed the proposal by MBK Partners and Young Poong to appoint six directors.

Among these, five advisory firms recommended voting in favor of Korea Zinc's director candidates, including Chairman Choi Yun-beom and outside director Hwang Deok-nam. Glass Lewis, Sustinvest, Korea Corporate Governance Service ESG Research Institute, Korea ESG Standards Institute, and Korea Corporate Governance Forum fell into this category. Four of these firms, excluding Korea Corporate Governance Service ESG Research Institute, opposed all four candidates recommended by MBK and Young Poong: Park Byung-wook, Choi Yeon-seok, Choi Byung-il, and Lee Sun-sook.

However, the Korea Corporate Governance Service (KCGS) took a different stance, recommending against Chairman Choi's reappointment citing "damage to corporate value and infringement of shareholder rights." KCGS cited alleged failures in internal controls during the investment in One Asia Partners and the acquisition of U.S.-based Igneo Holdings as primary grounds.

National Pension's 5.3% Stake as Casting Vote

Current voting rights stand at approximately 42% for Young Poong and MBK versus roughly 39-40% for Chairman Choi's side. With only a 2-4 percentage point gap between the two camps, the National Pension Service's approximately 5.3% stake is expected to determine the outcome.

The National Pension Service's Stewardship Committee is scheduled to hold a meeting this week to discuss voting direction. Korea Zinc has been actively communicating with the National Pension, including holding separate briefing sessions. Given the high proportion of foreign investors, the company hopes that recommendations from global advisory firms will translate into actual votes.

Korea Zinc's current board consists of 11 members aligned with Chairman Choi and 4 aligned with Young Poong and MBK. With 5-6 new directors to be appointed at this shareholders meeting, the board composition will be restructured. Depending on which side the National Pension supports, control of the board could shift dramatically.

Management Performance vs. Governance Controversy

Korea Zinc is emphasizing its financial performance and shareholder return policies. The company highlighted that it recorded its highest-ever revenue and operating profit last year, achieving operating profit for 44 consecutive years. It also announced the complete cancellation of approximately 2.04 million treasury shares acquired and determined a dividend of 20,000 won per share for fiscal 2025.

Governance improvements were also presented as key evidence. The company explained that it amended its articles of incorporation to have an outside director serve as board chairman and enhanced board diversity by appointing additional female and foreign directors. Korea Zinc's outside director ratio stands at 68%, exceeding the 51% average for domestic listed companies.

The company's total shareholder return (TSR) from March 2019 to last month reached 465.6%, three times the industry average. Additionally, the company is pursuing plans for large-scale refinery investments for critical mineral production in the United States.

The amended Commercial Act also played a role in advisory firms' support for Korea Zinc's five-director appointment proposal. Under the Commercial Act effective this September, an additional separately elected audit committee member is required, and the company's position is that appointing five directors now would allow for the addition of one separately elected audit committee member later.

Proxy advisory firms also recommended voting in favor of Korea Zinc's proposal to convert approximately 917.7 billion won in voluntary reserves to unappropriated retained earnings. This amount is more than double the approximately 392.5 billion won proposed by MBK and Young Poong.

Proxy Solicitation Firm Impersonation Controversy

A new legal dispute has emerged during the management battle. Korea Zinc filed a complaint with police alleging that Young Poong and MBK's proxy solicitation firm impersonated the company. Young Poong immediately refuted this as "groundless claims."

A Korea Zinc official stated, "Five of the seven domestic and international proxy advisory firms recommended voting in favor of all company director candidates, including Chairman Choi Yun-beom," adding "this reflects the opinion that a board centered on current management should continue for the enhancement of Korea Zinc's corporate and shareholder value."

The National Pension's decision at the regular shareholders meeting on March 24 is expected to determine the direction of Korea Zinc's management dispute.