Korea Zinc Chair Choi Yoon-beom speaks at a press conference in Seoul on Nov. 13, 2024. (Newsis)
Korea Zinc Chair Choi Yoon-beom speaks at a press conference in Seoul on Nov. 13, 2024. (Newsis)

A handful of proxy advisory firms here and abroad have endorsed Korea Zinc’s proposal for an extraordinary general shareholders meeting next week, supporting the current leadership of the world’s largest zinc smelter amid its fierce takeover battle with the MBK Partners-Young Poong alliance.

Most of the proposals by Korea Zinc's board have won the backing of Glass Lewis, a US-based leading global proxy advisory firm, and other Korean advisers, including Korea ESG Research Institute, Sustinvest and Korea ESG Rating. Other firms like the Institutional Shareholder Services group of companies and Korea ESG Standards Institute sat on the fence, according to industry sources Thursday.

“The alignment of global and local advisory firms with the current leadership underscores the importance of stability and strategic continuity for Korea Zinc. The (MBK-Young Poong) consortium should take these recommendations into account and work constructively toward the long-term growth and value creation of the company,” a Korea Zinc official said.

The shareholders meeting slated for Jan. 23 would be a critical face-off in the monthslong management battle between Korea Zinc Chair Choi Yoon-beom and the MBK-Young Poong coalition in which no party has decisively won a controlling stake.

The MBK-Young Poong coalition has secured a 40.97 percent stake in Korea Zinc, while Choi's side owns a 34 percent stake.

Glass Lewis, a US-based leading global proxy advisory firm, touted Korea Zinc’s stellar performance as having outpaced other industry players over the past few years under the leadership of Choi.

It recommended Korea Zinc shareholders endorse the board’s key proposals, including the adoption of a cumulative voting system and setting an upper limit on the number of directors on the board.

Cumulative voting refers to a system that grants shareholders voting rights proportionally to the number of shares they hold and multiplies them by the number of directors up for election to the board of directors.

But unlike other methods, all of the votes can be directed toward a single issue or director candidate, as opposed to having to divide their influence among all the decisions up for consideration. This system is said to benefit minority shareholders. Korea Zinc’s board is seeking to harness the method to fend off MBK’s takeover bid by restricting candidates proposed by the private equity fund from getting a seat at the boardroom.

“While cumulative voting could introduce some degree of strategic maneuvering, such as tactical nomination strategies, we ultimately believe that the benefits of enhancing shareholder representation and accountability outweigh these risks in this case,” an agenda analysis report released by Glass Lewis on Tuesday said.

Glass Lewis advised voting for all seven candidates nominated by the board, but proposed a strategic approach to support only four candidates under a cumulative voting system to avoid vote dispersion. If cumulative voting is not adopted, the firm recommends supporting all seven nominees and rejecting all 14 candidates proposed by the MBK-Young Poong consortium.

The US-based advisory firm Institutional Shareholder Services group of companies advised shareholders to endorse the upper limit on the number of directors, which was one of the key agenda items proposed by Korea Zinc’s management side.

On the Korea Zinc chair’s push to expand the board to 19 members, ISS stated that a 16-member board would be appropriate, adding four seats to the current 12. It also recommended approval for only four of the 14 directors proposed by MBK and Young Poong, opposing the remaining 10.

Meanwhile, local firms Sustinvest and Korea ESG Rating have also backed cumulative voting, emphasizing its role in protecting minority shareholders and broader shareholder interests.

By Park Han-na (hnpark@heraldcorp.com)