World's Largest Proxy Advisory Firm Blocks Chairman Choi's Reappointment

ISS (Institutional Shareholder Services), the world's largest proxy advisory firm, has recommended voting against the reappointment of Korea Zinc Chairman Choi Yoon-beom as an internal director. In its regular shareholder meeting analysis report published on the 9th, ISS recommended opposing Chairman Choi's reappointment at Korea Zinc's shareholder meeting scheduled for the 24th, while supporting the election of five directors: three candidates recommended by the Youngpoong-MBK Partners alliance, one recommended by Korea Zinc's board, and one recommended by U.S. joint venture Crucible JV.

While ISS acknowledged Korea Zinc's strong performance and governance improvement efforts, it raised concerns about governance risks exposed during the management dispute. Based on the most recent fiscal year, Korea Zinc's revenue reached 16.6 trillion won, a 37.6% year-over-year increase and an all-time high, with operating profit and net profit also showing significant improvement. Measures to enhance corporate governance, such as expanded shareholder returns and increased proportion of outside directors, were also positively evaluated.

However, ISS determined that current management was involved in questionable practices during the control defense process, identifying Chairman Choi as a central figure in controversies over capital allocation and procedural oversight. ISS stated, "The core issue of this shareholder meeting is governance," adding, "Regardless of performance, we take seriously the corporate governance risks accumulated during the management dispute."

Dispute Intensifies Over Legality of Proxy Voting

Ahead of the shareholder meeting, the conflict between both sides has escalated into questions about the legality of proxy voting procedures. On the same day, Korea Zinc announced it had filed criminal complaints with Seoul Jongno Police Station against some employees of the proxy solicitation agency working for the Youngpoong-MBK alliance, citing violations of the Capital Markets Act and obstruction of business.

Korea Zinc claimed that "agency employees approached shareholders wearing what appeared to be Korea Zinc employee badges around their necks, and after posting notices marked 'Korea Zinc Co., Ltd.' at the homes of unreachable shareholders, solicited proxy voting by phone." Korea Zinc explained that some shareholders responded to proxy delegation procedures after mistaking the contact person for a Korea Zinc representative.

The Youngpoong-MBK alliance immediately refuted these claims. They stated, "This is a one-sided assertion distorting the facts," emphasizing that "the advisory institutions handling proxy solicitation are professional organizations that have long performed proxy solicitation services for numerous listed companies." They clarified that business cards used by proxy representatives clearly indicated 'MBK-Youngpoong Alliance Representative,' and the phrase 'Korea Zinc Shareholder Meeting' was merely a practical designation to specify the relevant meeting.

The Youngpoong-MBK alliance countered that "Korea Zinc's criminal complaint is a pressure tactic to discourage legitimate proxy voting activities and interfere with shareholders' free decision-making," stating they would "pursue civil and criminal liability if baseless allegations and criminal complaints continue."

Tight Shareholding Structure: National Pension Fund Holds Casting Vote

At the shareholder meeting on the 24th, six directors whose terms are expiring will be elected through cumulative voting, with results potentially leading to a complete reorganization of the board's power structure. The Youngpoong-MBK alliance's stake is estimated at approximately 42%, while Chairman Choi's side is known to have secured approximately 40% of shares, including the 10.6% stake held by U.S. joint venture Crucible JV.

With shareholdings nearly even between both sides, the voting decision of the National Pension Fund, which holds approximately 5%, has emerged as the key variable that will determine the outcome. Given that the National Pension Fund has historically given considerable weight to recommendations from proxy advisory firms like ISS, there is speculation that ISS's opposition recommendation could influence the National Pension Fund's voting direction this time as well.

An industry insider analyzed, "With both sides' shareholding ratios nearly identical in the 40% range, the choices of the National Pension Fund and minority shareholders will determine the outcome," adding, "ISS's recommendation has significant influence on institutional investors' decisions and could work as a burden for Chairman Choi's side."

Where Is This Century-Old Company's Management Dispute Headed?

The management dispute between Korea Zinc and Youngpoong intensified starting last year. Korea Zinc was established as a subsidiary of Youngpoong in 1974, but strengthened its independence during the 2000s under Chairman Choi's management expansion. Last year, the Youngpoong-MBK alliance acquired a large stake in Korea Zinc and launched a management challenge, bringing the conflict to the surface.

Controversy over voting rights restrictions related to cross-shareholding erupted particularly during the extraordinary shareholder meeting in January and the regular shareholder meeting in March last year. The Youngpoong-MBK alliance claimed, "Chairman Choi's side restricted the voting rights of Youngpoong, the largest shareholder, through illegal cross-shareholding formation," asserting this was "a serious illegal act that undermines the foundation of commercial law and capital market order."

Korea Zinc countered that "all procedures were conducted legally," stating, "The Youngpoong-MBK alliance's claims are merely arguments to justify their position in the management dispute."

Future Outlook [AI Analysis]

With ISS's opposition recommendation and the National Pension Fund's voting direction intertwined, the outcome of the shareholder meeting on the 24th is difficult to predict. If the Youngpoong-MBK alliance secures a majority of directors, the board structure will be reorganized, likely having a significant impact on the direction of management control. Conversely, if Chairman Choi's side maintains the board, the management dispute is expected to become prolonged.

The prevailing view in the industry is that "the direction after this shareholder meeting will be more important than the dispute between both sides." Depending on the meeting results, additional legal disputes may arise, or both sides may continue competing to secure shares. Particularly, if the governance risks pointed out by ISS are not resolved, there are concerns that restoring institutional investors' trust may take time.

Attention is focused on how the management dispute of this century-old company representing Korea's non-ferrous metal industry will conclude, and how corporate governance will be improved in the process.