Young Poong accuses Korea Zinc chairman of abusing board, draining profits

Korea Zinc Chairman Choi Yun-beom speaks during a press conference at the Korea Chamber of Commerce and Industry in Seoul, Nov. 13, 2024. Korea Times photo by Choi Joo-yeon

Young Poong accused Korea Zinc Chairman Choi Yun-beom of embodying “the very definition of bad corporate governance and everything that damages shareholder value” on Monday, marking one year since it joined forces with private equity firm MBK Partners to challenge his managerial control.

The Young Poong-MBK alliance is currently the largest shareholder of the world’s largest zinc smelter.

“As the largest shareholder, we will remain steadfast until Korea Zinc achieves sound corporate governance, underpinned by an independent board, transparent operations and accountable management,” a Young Poong official said.

According to Young Poong, the core problem with Choi’s leadership is that Korea Zinc’s board has been effectively paralyzed, with major investment decisions pushed through unilaterally by him and corporate assets diverted to defending his personal control.

He allegedly approved large-scale investments without resolutions or reviews, relying on close associates as rubber-stamp directors. A notable example is the 560 billion won ($403 million) investment in OneAsia Partners, a private equity firm run by his middle school classmate and linked to the SM Entertainment stock-rigging scandal.

Such decisions, made without board oversight, effectively allowed Choi to treat Korea Zinc as his personal property.

Young Poong also said that company funds were diverted from pursuing new growth opportunities to protecting Choi’s personal control. It cited the roughly 2.5 trillion won spent on a share buyback, which depleted distributable profits and prevented the firm from paying an interim dividend this year, after having done so for the previous two years.

Shareholders of Korea Zinc line up to enter the venue for the company’s extraordinary shareholder meeting at the Grand Hyatt Seoul, Jan. 23. Joint Press Corps

Young Poong further claimed that Choi created a circular shareholding structure by directing overseas subsidiary SMC to engage in an illegal 57.5 billion won cross-shareholding investment, thereby blocking Young Poong’s voting rights. It estimated that more than 100 billion won was also spent over the past year on legal, consulting and other fees for the purpose of defending his control.

Choi is currently under investigation for violating antitrust laws after allegedly using overseas subsidiaries SMC and SMH to design a circular shareholding structure that restricted Young Poong’s voting rights.

In addition, Choi allegedly entered into an unlawful advisory agreement with ACT, a platform claiming to represent minority shareholders, in order to target Young Poong.

He now faces complaints of violating the Commercial Act and the Capital Markets Act after allegedly attempting to use ACT to sway voting outcomes at the recent shareholder meeting.

During Choi’s tenure, meanwhile, Korea Zinc has abandoned its four-decade debt-free management policy.

Over the past year, net cash declined by 4.1 trillion won while borrowing increased by 3.7 trillion won, leaving the company 3.3 trillion won in net debt. Interest expenses also surged more than fourfold, from 25 billion won to 110 billion won.

Despite steady performance in the core smelting business, losses from investments, new businesses and spending to defend Choi’s control eroded profitability, driving the consolidated operating margin down from 8.3 percent to 6.9 percent.