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NPS Stewardship Season 2: Korea Zinc Becomes the First Test

ISS Fires the First Shot of the 2026 Proxy Season

As of February 17, the most consequential proxy recommendation of the 2026 Korean AGM season has already landed. Institutional Shareholder Services (ISS) has issued a recommendation opposing the re-election of Choi Yoon-bum as inside director of Korea Zinc (고려아연) ahead of the company's March 24 annual general meeting. ISS cited a cluster of governance concerns: the company's execution of a high-price treasury share buyback followed by a low-price rights offering that transferred value away from minority shareholders, a contested cross-shareholding arrangement with Youngpoong (영풍) that effectively restricted voting rights, and a pattern of major strategic capital commitments that bypassed adequate board deliberation. For a company of Korea Zinc's scale — a KOSPI 100 constituent and the world's largest zinc smelter — a major international proxy advisor's "against" on the chairman-CEO is an unusually sharp signal.

ISS's recommendation by itself does not determine the outcome. But it forces the central question into the open: what will the National Pension Service do? NPS holds approximately 5% of Korea Zinc's outstanding shares, placing it in a pivotal swing-vote position between the current management bloc and the dissenting shareholder camp. This week, the market is watching NPS's response with unusual intensity — and not only because of Korea Zinc.

Stewardship Code Season 2: What NPS Actually Changed

The Korea Zinc situation arrives at an inflection point for NPS stewardship policy. In early February, NPS Chairman Kim Seong-ju publicly framed 2026 as the start of "Stewardship Code Season 2" — a deepening of the activist posture that NPS has been building since the code's 2018 introduction. The most concrete change announced so far is the expansion of the pre-disclosure threshold: NPS will now pre-announce its intended vote direction at companies where it holds 5% or more of shares, down from the previous 10% threshold. This is not a marginal adjustment. Moving from 10% to 5% roughly doubles the number of companies where NPS's position is publicly committed before the AGM, reducing the scope for late-stage negotiation and increasing accountability on both sides.

NPS also indicated it will widen its engagement mandate — conducting non-public dialogues with companies on dividends, executive compensation, legal compliance, and industrial safety, and initiating derivative lawsuits primarily against companies that participated in those dialogues but failed to act. This last point is a meaningful escalation: NPS is signaling that engagement without follow-through will now carry legal consequence, not just a "against" vote. For portfolio companies that have treated NPS letters as manageable formalities, the calculus has changed.

The commercial code context adds another layer. The second amendment to the Korean Commercial Code, promulgated in September 2025 and effective September 10, 2026, requires large listed companies (assets above KRW 2 trillion) to adopt cumulative voting and expands audit committee independent elections. Directors now owe a duty of loyalty to shareholders — not just to the company. Minority shareholders holding 1% of voting shares can request cumulative voting six weeks before an AGM without an Articles of Incorporation amendment. For the first time since the Stewardship Code's introduction, institutional investors have both policy momentum and statutory tools pointing in the same direction.

The Korea Zinc Test: Three Scenarios

Given the attention on NPS heading into the March 24 Korea Zinc AGM, three scenarios are in play as of this week:

  • NPS votes against Choi's re-election. This would mark the clearest demonstration of Season 2 intent to date. ISS's independent recommendation gives NPS political cover; a coordinated "against" from both major international proxy advisors and Korea's largest domestic institutional investor would almost certainly defeat Choi's re-election bid. The signal to the broader market — particularly other KOSPI companies with contested director slates — would be significant.
  • NPS abstains or withholds. A middle path that avoids direct conflict with management while still registering dissatisfaction. Given NPS's history in similarly fraught situations (notably its controversial abstention in the Samsung C&T merger), this scenario carries real precedent. It would be widely read as a failure of Season 2 commitments, however well NPS tried to frame it.
  • NPS votes in favour. The least likely outcome given the public ISS recommendation and NPS's own stated policy trajectory, but not impossible if NPS concludes that Choi's continuation serves long-term shareholder value. This scenario would severely undermine the credibility of the Season 2 announcement.

As of February 17, NPS has not publicly indicated its position. Under the new 5% pre-disclosure policy, investors should expect NPS to announce its intended vote direction before the March 24 meeting — earlier than in past cycles.

What Institutional Investors Should Do Before March 24

The Korea Zinc situation is not just a binary trade around one AGM. It is a leading indicator for how the entire 2026 proxy cycle will unfold. Institutional investors with Korean equity exposure should consider the following actions this week:

  • Review Korea Zinc exposure and voting policy alignment. Clients with direct holdings should confirm their proxy advisor coverage and ensure their voting policy is consistent with their stated stewardship commitments on board independence and related-party transactions. An "against" on Choi that is grounded in policy — rather than merely following ISS — will be more defensible to beneficiaries and regulators.
  • Update engagement logs for NPS-tracked portfolio companies. NPS's new engagement framework means that companies in the 5–10% ownership band are now subject to pre-disclosure. Investors in those same companies should document their own engagement records before AGM season peaks in March and April.
  • Model Commercial Code transition risk. The September 2026 effective date for the second amendment creates a one-season window in which current governance structures remain technically compliant but will need to change. Companies with controlling-family nomination processes, weak audit committees, or low independent director ratios will face compliance demands this autumn. Begin flagging these positions now.

The window between now and Korea Zinc's March 24 AGM is short. Investors who need to refine their 2026 Korean voting frameworks should treat this as the moment that window closes.

References

  1. ISS (Institutional Shareholder Services), "Korea Zinc AGM 2026 — Vote Recommendation Report," February 2026. Available from: issgovernance.com
  2. National Pension Service (NPS), "Stewardship Code Season 2 — Chairman Kim Seong-ju Press Briefing," NPS Media Release, February 2026. Available from: nps.or.kr
  3. Ministry of Health and Welfare (보건복지부), "NPS Pre-Disclosure Policy Expansion — 5% Threshold Notice," MHW Announcement, January 2026. Available from: mohw.go.kr
  4. Kim & Chang, "Promulgation of September 9, 2025 Amendment to Korean Commercial Code," Client Alert, September 2025. Available from: kimchang.com
  5. ACGA (Asian Corporate Governance Association), "Korea Moves Forward on Governance Reform," ACGA Blog, 2025. Available from: acga-asia.org