MBK Partners Claims Chairman Choi’s Proposal to Introduce Cumulative Voting Into Korea Zinc Criticized as ‘Hypocritical’

• In August 2024, a provision to exclude cumulative voting was added at the extraordinary general meeting (“EGM”) of Sorin Corporation (currently renamed as “KZ Trading Co. Ltd.”), where the Choi family is the majority shareholder, effectively blocking Young Poong Corporation's board representation.
• Chairman Choi is abusing cumulative voting, first excluding then adopting as necessary, solely to safeguard his position.
• ISS has recommended opposing the cumulative voting system proposed by Chairman Choi, deeming it a tool for personal gain.

SEOUL, South Korea--(BUSINESS WIRE)--Global proxy advisory firm Institutional Shareholder Services (ISS) has issued a recommendation to oppose the adoption of a cumulative voting system at Korea Zinc’s upcoming extraordinary general meeting (EGM) on January 23. The proposed measure, backed by Chairman Choi Yoon-beom, has drawn significant criticism as it turns out that he excluded cumulative voting at Sorin Corporation’s EGM in August 2024 to secure control over the company’s board.

This self-contradicting approach—adopting cumulative voting when advantageous and excluding it when not—is being criticized by experts across the financial and legal sectors as a blatant abuse of corporate governance principles and ‘a typical example of hypocrisy.’

At the August 2024 EGM of Sorin Corporation, convened by the CFO of Korea Zinc, Mr. Lee Seung-ho, who also serves as the CEO of Sorin Corporation, a resolution to amend the articles of incorporation was passed to exclude cumulative voting. This move, despite opposition from Young Poong Corporation, was approved by the Choi family and Korea Zinc, who collectively hold a 66.67% stake in Sorin Corporation.

Because Sorin Corporation is not publicly listed, it is exempt from special regulations that apply to listed companies (the ‘3% voting rule’ for amendments of the AOI related to cumulative voting). Critics argue this exemption allowed Choi to unilaterally block Young Poong’s attempt to secure board representation, raising serious concerns about corporate fairness and minority shareholder rights.

Korea Zinc’s largest shareholders, MBK Partners and Young Poong, criticized the exclusion of cumulative voting at Sorin Corporation, stating, “This was an abuse of power by Chairman Choi to prevent Young Poong, a minority shareholder, from gaining any board representation. ISS has recognized Choi’s hypocritical actions and ulterior motives, which led them to recommend opposing the cumulative voting proposal at Korea Zinc’s EGM.”

On January 9, ISS issued its recommendations supporting the need for reforms within Korea Zinc’s board and opposing the introduction of a cumulative voting system aimed at securing Chairman Choi’s control. ISS stated that, “While cumulative voting system is generally considered to be beneficial for minority shareholders, in this case, they may lead to unintended consequences that dilute the impact of the changes sought by the dissident (MBKP and Young Poong).”

ISS further recommended to reject all seven outside director nominees proposed by Korea Zinc’s board and advocated the election of directors nominated by MBKP and Young Poong to enhance board independence and strengthen oversight of management.