MBK Partners and Young Poong Propose Key Governance Changes for Korea Zinc

In a significant move regarded as pivotal for corporate governance, the leading shareholders of Korea Zinc, MBK Partners and Young Poong, have formally presented a series of shareholder proposals ahead of the company's upcoming Annual General Meeting (AGM) scheduled for March 2025. These proposals aim to enhance governance standards and shareholder returns, emphasizing the need for a robust and independent board consisting of both new and existing directors.

Key Proposals for Governance

The proposals submitted by MBK Partners and Young Poong encapsulate critical aspects aimed at reinforcing governance within Korea Zinc. The first recommendation is the appointment of a temporary chair—a step necessitated by recent governance concerns following the disruption experienced during Korea Zinc’s extraordinary general meeting (EGM) on January 23.

Additionally, they propose a full cancellation of treasury shares, a decision that seeks to uphold earlier commitments by Chairman Choi Yun Beom. The shareholders note that, despite public assertions regarding treasury shares, the company has yet to take action to cancel over 12% of its treasury stock. This delay raises concerns regarding potential misuse of shares, which could dilute shareholder value and compromise corporate governance integrity.

A spokesperson for the entities stated, "There is a significant risk that treasury shares will be ineffectively disposed of instead of being cancelled. This disregard for prior public commitments might lead to adverse effects, including the risk of selling shares to favorable shareholders, thus harming overall corporate equity."

Enhancements to Shareholder Returns

In line with their commitment to improving shareholder value, the firms propose a cash dividend of KRW 7,500 per common share for the fiscal year. When combined with the interim dividend, shareholders would receive a total payout of KRW 17,500 per share. Notably, this proposed amount falls below the KRW 20,000 paid out in the 49th fiscal year, raising questions about Korea Zinc's profit trajectory given its earnings exceeding prior year figures through Q3 2023.

Concerns about financial transparency have also been put forth. Following the proposals, Korea Zinc disclosed preliminary earnings—highlighting a 15.6% increase in operating profit for 2024, yet a striking 22.1% decline in net profit due to substantial non-operating losses. This inconsistency with operational performance has prompted MBK Partners and Young Poong to seek clarity from the company.

Restructuring the Board of Directors

The duo has also advanced a proposal for extensive restructuring of the board of directors, aspiring to nominate between 5 and 17 new directors with an emphasis on creating a diverse and professional governance team. This proposal highlights a systematic approach to board restructuring that is contingent upon the outcome of a pending injunction related to resolutions passed during the EGM.

Should both proposed changes on cumulative voting and the board size cap be suspended, the shareholders will endorse a total of 14 directors’ appointments. Alternatively, if only the board size cap is affected, they will propose expanding the number to 17. A significant roster of candidates has been outlined to populate the board, encompassing both non-executive and independent roles.

In response to these motions, a representative from MBK Partners and Young Poong remarked, "As the largest shareholder, we are dedicated to restoring governance integrity and safeguarding shareholder interests. Establishing a new professional board is integral to enhancing corporate value and ensuring alignment with shareholders' objectives."

Conclusion

The shareholder proposals by MBK Partners and Young Poong signify a robust initiative aimed at enhancing Korea Zinc's governance frameworks and financial accountability. With the AGM approaching, they maintain a steadfast commitment to advocating for independent and governance-aligned board composition, stressing the necessity for transparent financial management practices and responsible capital allocation. As developments unfold leading up to the meeting, stakeholders will be watching closely to see how these proposals shape the future of Korea Zinc.

This advancement serves not just as a means to bolster governance but also as a clarion call for other stakeholders in the industry to prioritize long-term value creation over short-term gains.