SEOUL, South Korea, Dec. 24, 2024 -- Korea Zinc (KRX:010130) held a special directors meeting on December 23 to finalize the agenda for the extraordinary general meeting (EGM) scheduled for January 23. The meeting focused on measures to strengthen minority shareholders' rights and protections while expanding the independence and diversity of the board. Key resolutions were adopted after an in-depth discussion.
Specifically, Korea Zinc plans to implement promises made by the management at a prior press conference, including appointing an independent director as the board chair, establishing regulations to protect minority shareholders, introducing quarterly dividends and implementing a stock split. The agenda also includes placing a cap on the board size to ensure stable and efficient operation of the board. In addition, a cumulative voting system proposed by Yoomi Development, Korea Zinc's shareholder, will be addressed at the EGM.
The agenda also includes MBK and Young Poong's proposal to introduce an executive officer system and appoint 14 directors.
The Korea Zinc board stated that it recognizes the positive aspects in the executive officer system proposed by MBK, Young Poong and other shareholders, including strengthening the responsibility and expertise of the executive function while strengthening the board's supervisory role. Thus, regardless of the intent behind the proposal, the board stated it has prospectively reviewed and is willing to accept it. The board emphasized its commitment to considering any measures that would benefit the company and its shareholders.
Implementing an Optimum Board Size in Line with Global Standards
The Korea Zinc board decided to propose amending the articles of incorporation to place a cap on the number of directors on the board to ensure board stability and efficiency. This decision followed a careful assessment, including recommendations from Institutional Shareholder Services (ISS) guidelines and the global proxy advisory firm Glass Lewis, which has stated, "We believe that boards with more than 20 members will typically suffer under the weight of 'too many cooks in the kitchen' and have difficulty reaching consensus and making timely decisions." The board decided it was necessary to place a cap in order to prevent potential issues that could rise from having too few or too many directors. Domestic proxy advisory firms, including the Korea Institute of Corporate Governance and Sustainability and Sustinvest, have also warned against having excessively large or bloated boards, stating that having too many directors could dilute accountability and weaken decision-making capabilities.
Currently, Korea Zinc's board consists of 13 members. MBK and Young Poong have proposed appointing 14 additional directors. If all their nominees are appointed, the board would expand to 27 members, resulting in a globally unprecedented large and inefficient board. This is why Korea Zinc has proposed a new provision limiting the maximum number of directors to 19.
Under the current articles of incorporation, the board only requires a minimum of three directors – it does not specify a maximum cap.
Most domestic listed companies specify both minimum and maximum number of directors in their articles of incorporation. No publicly traded companies in Korea have boards exceeding 20 members.
According to a 2017 study by a US leadership consulting firm Spencer Stuart, the board size of S&P 500 companies ranges from a minimum of five to a maximum of 18 members, further highlighting the necessity of setting a cap.
Commitment to Strengthening Board Independence by Appointing an Outside Director as the Chairperson
Korea Zinc is also pursuing measures to enhance the independence of its board by appointing an outside director as the chair. The EGM agenda includes all the proposals previously announced by Chairman Yun B. Choi during the press conference held on Nov. 13. Furthermore, in line with global standards, the company plans to appoint a foreigner, financial expert and crisis management specialist as additional outside directors, in addition to nominating a female outside director. However, since the articles of incorporation amendment proposed by Young Poong regarding the introduction of an executive officer system already includes a provision allowing the board to decide on its chairperson, no separate amendment will be made if Young Poong's proposal is approved at the shareholders' meeting.
An additional proposal has been made to elevate the Sustainability Management Committee to a legally recognized board subcommittee named the "ESG Committee." The committee previously operated only as an advisory body to the CEO with the participation of two outside directors. It has evaluated, reviewed and advised the CEO on the current state, direction and short- and long-term plans of Korea Zinc's sustainability management efforts. The purpose of this initiative is to strengthen ESG-related capabilities by formally elevating the committee to the status of a board.
Strengthening Minority Shareholder Protection and Pursuing Shareholder-friendly Policies Through a Cumulative Voting System
On December 10, 2024, Yoomi Development, a shareholder of Korea Zinc, formally requested the introduction of a cumulative voting system to empower and enhance the protection of minority shareholders. Korea Zinc's board of directors accepted this request, adding a proposal to amend the articles of incorporation to adopt a cumulative voting system, along with an agenda for director appointments based on this system. A cumulative voting system is considered to be one of the most significant measures for protecting minority shareholders' rights and ensuring board diversity. Korea Zinc's board has acknowledged that this system is a key safeguard under corporate law to prevent minority shareholders' voting rights from being rendered meaningless and has decided to actively embrace the proposal. This system is notably recommended by leading global proxy advisory firms such as Glass Lewis and the ISS.
※ Cumulative Voting System In a cumulative voting system, each shareholder is entitled to one vote per share, multiplied by the number of available director positions, when electing board of directors. At a shareholders' meeting convened to elect two or more directors, shareholders have voting rights corresponding to the number of directors to be elected for each share they hold. These voting rights can be allocated entirely to a single candidate or distributed among multiple candidates as desired by the shareholder. |
Additionally, a new regulation for minority shareholder protection has been established, along with the introduction of quarterly dividends and a proposal for a stock split. First, the new regulation for minority shareholder protection specifies that management must respect the rights of single and minority shareholders, and if a minority shareholder requests an explanation regarding important management matters, relevant information must be provided. This is intended to enhance communication with minority shareholders and improve transparency. In addition to the current interim dividend system, a new proposal for quarterly dividends distributed at the end of March, June and September has been introduced as part of the effort to strengthen shareholder-friendly policies.
Moreover, the proposal for a stock split, suggested by the minority shareholder alliance as well as MBK and Young Poong, has also been included. MBK and Young Poong have been emphasizing the need for a stock split, pointing to Korea Zinc's low share price and insufficient trading volume as the reasoning behind their call. As such, there will likely be no objections to the approval of this proposal at the EGM.
A Korea Zinc representative stated, "The board of directors has carefully considered the best options for the company and its shareholders and has finalized the agenda for the EGM. We hope that MBK and Young Poong will take the EGM as an opportunity to work together with us as partners in contributing to the company's future and growth."
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