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Photo courtesy of Yonhap News |
[Alpha Biz= Kim Jisun] The Korea Corporate Governance Forum has publicly urged major conglomerates—including Hyundai Motor Company, LG Corp., and Hanwha Group—to sell their stakes in Korea Zinc amid an ongoing management control dispute. The forum argued that cross-shareholdings formed through treasury shares undermine minority shareholders’ rights, distort market order, and run counter to the legislative intent of the third revision to Korea’s Commercial Act, which passed the National Assembly this week.
In a statement released on the 26th, the forum called on Hanwha Vice Chairman Dong-kwan Kim, LG Chairman Kwang-mo Koo, and Hyundai Motor Group Executive Chair Euisun Chung to divest their respective stakes of approximately 8%, 2%, and 5% in Korea Zinc. It said the holdings—largely created through reciprocal share exchanges—effectively function as management-friendly stakes, diluting the value of ordinary shareholders’ equity in Korea Zinc.
The forum stressed that the recently passed bill mandating the cancellation of treasury shares aims precisely to prevent such infringements on shareholder rights. “The purpose of the third Commercial Act revision mandating treasury-share cancellation is to block abuses that harm shareholders,” the forum said, adding that “using treasury shares to form cross-shareholdings by leading Korean companies constitutes a challenge to the National Assembly, the government, the market, and shareholders.”
The forum also criticized Korea Zinc’s investment structure for its U.S. smelter project, noting that a roughly KRW 2.85 trillion third-party allotment capital increase targeting the Crucible JV would dilute existing shareholders’ equity value by an estimated 10.3%.
“It is difficult to find precedent for a joint-venture structure in which the U.S. government effectively acquires an equity stake in the parent company of a private enterprise like Korea Zinc,” the forum said, arguing that the board should have pursued alternatives that would enable the joint venture without diluting overall shareholder value. From the perspective of directors’ fiduciary duty, the forum added, the board should have selected and disclosed an option that maximized proportional benefits for shareholders.
Internal governance imbalances at Korea Zinc were also highlighted. The forum pointed out that the combined annual compensation of two honorary chairmen in their 80s exceeds that of 13 independent directors, while three executive presidents responsible for day-to-day management reportedly hold no company shares. To address this, it recommended introducing stock-based compensation for executives and independent directors.
Looking ahead to the upcoming annual general meeting, the forum emphasized that the chair of the board—not the CEO—should preside over the meeting, arguing that board leadership is essential to protecting shareholders in situations with heightened conflicts of interest.
Alphabiz Reporter Kim Jisun(stockmk2020@alphabiz.co.kr)
