Korea Zinc’s incumbent management appears to have gained an edge ahead of a crucial extraordinary shareholders meeting Wednesday, as major proxy advisers lined up behind the board-backed candidate for a key audit committee seat and a court rejected an attempt by MBK Partners and Young Poong to restrict the voting rights of Chair Choi Yun-birm and related parties.
The shareholder meeting, set to take place at the Mondrian Seoul Itaewon in Yongsan-gu, Seoul, will elect four independent directors and one independent director who will also serve on the audit committee.
The four regular independent director seats are expected to be split evenly between the two sides, with Korea Zinc’s board and the MBK-Young Poong alliance each nominating two candidates.
That has put the spotlight on the separately elected audit committee seat, for which the two camps have fielded competing candidates.
Eight of nine major domestic and international proxy advisory firms, including global advisers ISS and Glass Lewis, have recommended that shareholders vote for Baek In-gyu, the candidate nominated by Korea Zinc’s board, according to industry sources.
Most of the advisers, meanwhile, recommended voting against Park Yoo-kyung, the candidate put forward by MBK and Young Poong.
The advisers cited Baek’s accounting and auditing credentials, including his qualifications as a certified public accountant in both Korea and the US and his extensive experience at accounting firms. His background in auditing and financial advisory services was viewed as particularly relevant as Korea Zinc pursues large-scale investments and business expansion.
The National Pension Service, which holds a 5.44 percent stake in Korea Zinc, also said Monday it would vote in favor of Baek. Unlike most proxy advisers, however, the pension fund said it would also support Park.
The outcome could hinge on Korea’s so-called 3 percent rule, which limits the voting power of controlling shareholders and related parties in the election of audit committee members.
Under the Commercial Act, the voting rights of a controlling shareholder and its related parties are capped at an aggregate 3 percent in such elections. That prevents MBK and Young Poong from exercising their full combined stake in the vote.
Choi’s side also faces restrictions because Young Poong and Korea Zinc remain classified as part of the same corporate group, bringing related parties on the management side under the voting cap as well.
The rule gives greater weight to institutional and minority shareholders, making recommendations from proxy advisers and voting decisions by major institutional investors particularly important in determining the outcome.
The incumbent management received another boost after a court rejected injunction requests filed by MBK and Young Poong seeking to restrict voting rights held by Choi and related parties.
Korea Zinc’s board currently consists of nine directors nominated or backed by the incumbent management and five nominated by MBK and Young Poong. If each side secures two of the four independent director seats as expected, the 18-member board would include 11 directors nominated or backed by the incumbent management and seven nominated by the MBK-Young Poong side.
The election of Baek would expand the board to 19 members. While Baek was nominated by Korea Zinc’s board, his position as an independent director and audit committee member means his election should not necessarily be viewed as giving management an additional aligned vote.
Still, securing the board-nominated candidate for the audit committee seat would represent an important governance win for the incumbent management in its prolonged control battle with MBK and Young Poong, while preserving its numerical advantage on the board.
Greater board stability could also help Korea Zinc push ahead with major long-term projects, including Project Crucible, its planned integrated smelter in the US, as well as its resource-recycling businesses.
“With most proxy advisers supporting Baek, Korea Zinc is expected to have an advantage in the audit committee vote,” an industry official said. “The incumbent management has also demonstrated its operating performance, including record first-half results, which could influence institutional and minority shareholders.”
hyejin2@heraldcorp.com
