SEOUL, South Korea–( BUSINESS WIRE )– After the Board of Directors Korea KRX:010130 proposed several resolutions that prioritize shareholder values and shareholder rights protection for discussion at next month's extraordinary general meeting, and MBK Partners and Young Poong intensified vicious slander on the board's decisions. Such a move rather proves the importance of these decisions proposed by the Board of Directors to the extent that it may disrupt the Consortium's attempt to control the Board of Directors in the next session, which is the sole purpose of the Consortium throughout its takeover bid. The consortium's frustration with the decisions is clearly evident in its ambivalent position on adopting cumulative voting, an iconic means of protecting minority shareholders and board diversity.
The consortium confirms that the cumulative vote cannot be discussed in the next special session, which it requested to be held despite its approval of the system itself. This clearly reveals what lies behind the consortium's attempt. Its focus on improving management, including enhancing shareholder values and improving financial structure, is nothing but empty rhetoric to cover up the real goal of acquiring Korea Zinc.
Even in its press release, the consortium identified cumulative voting as a means of protecting minority shareholders. Minority shareholder advocacy groups, civic groups, and political constituencies are seeking to make cumulative voting a legal obligation. However, the consortium opposes the adoption of this protection for minority shareholders in the next session only because the method is to its disadvantage. The opposition points out that the consortium is not turning a blind eye to anything other than its decision to appoint a group of 14 candidates to take control of the board, and has shown no sign of prioritizing the protection of minority shareholders.
Cumulative voting provides protection to minority shareholders as agreed by the consortium
Cumulative voting is an electoral system in which a shareholder has one vote per share, multiplied by the number of directors. As the consortium said in its statement, this method is considered a symbolic means of protecting minority shareholders. It ensures board diversity by allowing shareholders to subject controlling shareholders to oversight and, if they are united, to name their preferred candidate as director.
Minority shareholder advocacy groups and even the market welcome the adoption of cumulative voting. Recently, political circles are making legislative efforts to amend the Commercial Code to enhance the rights of minority shareholders.
At the annual general meetings (AGM) of KT&G and JB Financial Group in March this year, the activist funds succeeded in securing a seat on the board thanks to cumulative voting. It is almost the only way for shareholders with a minority stake to take a seat on a board controlled by the largest shareholder. For this reason, no one can disagree that cumulative voting is a symbolic measure to protect the rights of minority shareholders.
If this method is adopted, not only the consortium, but also pension funds, institutional investors, and a group of minority shareholders, will be able to appoint their preferred candidate to the position of director of the board, enhancing diversity on the board. The adoption of this method also represents the desire of the current Board of Directors and Chairman Yoon Bi Choi to largely relinquish their vested rights.
In addition, the cumulative voting resolution was proposed in the same way as the consortium made the shareholder resolution. Therefore, it is a topic worthy of discussion and judgment by all shareholders in the upcoming extraordinary session.
The adoption of cumulative voting conditional on amending the Articles of Association has been proven legal in various cases
The consortium asserts that the adoption of cumulative voting could deprive other shareholders of their rights to nominate candidates simply because they were not aware of the adoption of voting. It's a simple objection: she wants to reject the decision because she did not anticipate it or failed to anticipate it.
Article 542-7 of the Commercial Code states that a cumulative voting proposal must be submitted six weeks before the shareholders' meeting. The law sets a sufficient period of time for both the company and shareholders to prepare.
Also, when a listed company excludes cumulative voting in the articles of association, shareholders have the right to propose an amendment to the articles of association to adopt cumulative voting as a purpose of a general meeting under the Commercial Code. Legal circles agree that a shareholder resolution can be proposed by cumulative vote on the condition that the amendment to the articles of incorporation is approved, and therefore the company can propose such a resolution at the shareholder meeting.
According to legal interpretations and previous cases, the amendment to the articles of incorporation enters into force immediately after shareholders approve it in a general meeting. Therefore, there is no procedural problem in proposing a follow-up decision on the condition that the amendment to the statute is approved. However, the consortium claims that this process is procedurally flawed. This claim is reminiscent of two previous attempts to obtain an injunction against the company's tender offer, all of which were rejected by the court. The legal assertions made by the consortium have been proven wrong.
In fact, there are many cases where a shareholders' resolution has been proposed six weeks before the general meeting of shareholders with the condition that the amendment to the articles of incorporation be approved at the same meeting. At the extraordinary general meeting of Hanmi Sciences last month, where nine out of 10 board members had already been appointed, a shareholder resolution was proposed to appoint two more directors on the condition that they agree to amend the company's articles of association to increase the number of board seats. Moreover, at Hanjin's annual general meeting in March 2021, a shareholder resolution was proposed to appoint additional directors on the condition that the articles of incorporation be amended to increase the number of directors. The extraordinary session at Sambu Engineering in November 2018 is also another similar case of conditional shareholder resolution amending the articles of association. These cases clearly demonstrate the legality of a shareholders' resolution proposed as a follow-up to an approved amendment to the articles of association.
The legal circles conclude that the shareholders' decision to vote cumulatively does not differ from these conditional cases, because the commercial law does not limit the proposal for cumulative voting to the company only, and does not exclude cumulative voting in the articles of incorporation.
The company's growth and future value should be a priority
The Board reaffirms its positive position on the executive officer system proposed by the consortium, regardless of intent, because it can bring benefits, such as greater accountability and expertise in the executive function as well as strengthening the oversight capabilities of the Board of Directors. However, it is the consortium that opposes adopting the reasonable method due to its obsessive attempt to control the board of directors that dwarfs the continued growth and development of Korea Zinc and the protection of shareholders' rights.
The consortium does not seem to pay any attention to the fact that the cumulative voting and optimal board size “proposed by the Board of Directors of Korea Zinc” are recommended by global proxy advisors such as Glass Louis (JO:) and Institutional Shareholder Services (ISS), as well as other consulting firms, both local and international.
If a group of 14 candidates proposed by the consortium are appointed, the board will include approximately 30 directors, an unprecedentedly large and ineffective board that is rarely seen not only in Korea but also around the world. The Board of Directors proposed limiting the number of directors to 19 members to effectively reflect the recommendations of the agency's global consulting firms.
Korea Zinc's board of directors also proposed radical measures to improve shareholder values, such as new protections for minority shareholders, declaring quarterly dividends and stock splits. The proposals aim to establish corporate policy to be more shareholder friendly by requiring management to respect individual and minority shareholders, providing important information on decisions made by management to minority shareholders upon request, declaring quarterly dividends in addition to current interim dividends, and announcing par value stock splits. To improve access for investors, including minority shareholders.
Korea Zinc's Board of Directors and management are willing to accept any ideas that may be beneficial to the company and shareholders, said Chairman Yun B. Choi. He added: It appears that the wild accusations leveled by the MBK-Young Poong Union against the decisions proposed by the Board of Directors are based on its strong belief that the decision will disrupt its attempt to control the Board of Directors at the upcoming shareholders meeting. It is our sincere hope that the upcoming meeting will be an opportunity for the consortium to work as partners to discuss the growth and development of the Korean Zinc Company.
View source version on Businesswire.com: https://www.businesswire.com/news/home/20241225402693/en/
korea zinc
Jungwon Lee
+82-2-6947-2467
jwon@koreazinc.co.kr
Source: Korea Zinc Co., Ltd
