Sustin Best Ryu Yeong-jae (CEO), "Considerant the Control of Korea Zinc from the Perspective of Economic Security"... Argues for 'A 30-Year Clock'

*This content was translated by AI.

Sustin Best Ryu Yeong-jae (CEO) pointed out that ahead of the extraordinary general meeting of Korea Zinc scheduled for September 9, the "Korea Zinc Incident" as a proxy advisory firm should be viewed as a conflict between the control rights of national key industries and the logic of capital recovery.

Ryu (CEO), who previously served as chairman of the Korean Corporate Governance Forum, recently introduced his own column titled "Why Are We Picking Up and Memorizing the Textbook Abandoned by the U.S.?" on social media, raising concerns that short-term financial logic could stifle long-term investment in companies and industries.

In the post introducing the column, he noted that traditional investment evaluation indicators such as NPV (Net Present Value), IRR (Internal Rate of Return), and payback period rely on estimates of future cash flows; thus, innovation-driven market creation in markets not yet formed may be unfairly evaluated when compared using criteria suitable for existing businesses or efficiency-improving investments. Citing Clayton Christensen's "The Innovator's Dilemma," he explained that if financial metrics dominate, investment may skew toward cost reduction and efficiency improvements rather than creating new markets. He also referenced an analysis linking the delayed response of domestic company S to the HBM (High Bandwidth Memory) market with decision-making centered on finance and management, which led to the contraction of R&D organizations.

Ryu (CEO) extended this concern through his column to frame the Korea Zinc management dispute as a broader issue involving national key industries.

He stated, "Watching the struggle for control of the world's largest non-ferrous metal smelting company brings to mind the rusted smokestacks of America's Rust Belt and Britain's Midlands," warning that if financial logic takes precedence over industrial logic, long-term investments in facilities, technology, and human resources may be pushed aside.

He also introduced research by Cambridge University Professor Michael Keen and Oxford University Professor Jonathan Mitch, who identified chronic underinvestment and a financial logic prioritizing short-term profits as key factors in the decline of British manufacturing. Additionally, he presented an analysis by William Lazonick of Massachusetts Chu Se-cheu-dae (Prof.), criticizing how U.S. corporate strategy shifted from "retain and reinvest" to "downsize and distribute," thereby weakening long-term production and innovation capabilities.

He also addressed counterarguments from academia: since companies can raise capital again through share issuances, it is difficult to conclude that long-term investment capacity has been constrained solely by funds distributed to shareholders. While acknowledging this point, Ryu (CEO) emphasized that the average situation across all U.S. companies must be distinguished from industry-specific realities, stating, "Even if capital can be returned and later raised again in the market, once a production ecosystem and skilled workforce are severed, they are difficult to restore."

Ryu (CEO) summarized the time-table difference between financial capital and long-term industries as "a 5-year clock versus a 30-year industry." While acknowledging that debt utilization, asset sales, dividends, and buybacks are legitimate financial techniques for private equity funds, he stressed the need to address concerns such as: "When recovery periods and profit structures combine with large-scale process industries, is there not a risk that facility maintenance and expansion, environmental and safety investments, human capital investment, and technology accumulation will be overshadowed by short-term cash flows?"

He also cited the Homeplus case. MBK acquired Homeplus in 2015 for approximately 7.2 trillion won, including existing debt, followed by store sales and re-leasing. Homeplus filed for bankruptcy proceedings in 2025. Ryu (CEO) evaluated that "concerns about high financial burdens and asset liquidity encroaching on the business foundation have become reality."

In particular, Ryu (CEO) emphasized that unlike large supermarkets, the smelting industry's competitiveness is determined by long-term accumulated industrial capabilities. He stated, "Smelters are different from large supermarkets," explaining that "the competitiveness of the smelting industry comes not from land and buildings but from stable operations, accumulated process technologies, skilled workers, and the combination of raw material procurement and sales networks." He further explained, "Korea Zinc is the only antimony producer in Korea, and since China's export controls, the strategic importance of antimony in defense and semiconductor supply chains has increased significantly."

However, he drew a clear line that this does not mean the current management's control rights must be protected unconditionally. Ryu (CEO) stressed that while problems with owner-managed companies should be strictly checked, such measures must not hinder the long-term investment capacity of key industries, asserting, "The accountability of management and the sustainability of industrial foundations are not a choice between two options."

Ryu (CEO) also proposed institutional mechanisms to examine shifts in control rights over strategic industries from an economic security perspective. While citing the U.S. Committee on Foreign Investment (CFIUS) as an example, he explained that CFIUS, which targets foreign investment, cannot be directly applied to the Korea Zinc incident. Instead, he proposed a system where if control rights of companies holding national core technologies, strategic minerals, or key supply chains shift beyond a certain threshold—regardless of whether the capital is domestic or foreign—an economic security impact assessment would be required. He added that safeguards such as an independent review body and transparent criteria are necessary to prevent misuse of these measures as tools for defending management control.

He also emphasized the role of capital in supporting long-term industrial investment. Ryu (CEO) stated, "The only force capable of checking capital with a 5-year clock is ultimately capital with a 30-year clock," identifying the National Pension Service (NPS) as a starting point for this approach.

As both a major shareholder of Korea Zinc and an investor in private equity funds such as MBK, the NPS should, as an investor, demand that fund managers adhere to long-term industrial standards, and as a shareholder, apply the same criteria to both management and acquirers. Ryu (CEO) emphasized, "Pension funds for citizens' retirement are originally money with the longest time horizon," adding, "Making this money invest with the longest time horizon is the beginning of responsible investment."

Finally, he stressed that the value of strategic manufacturing industries should not be judged solely by short-term profits and shareholder returns. Instead, capabilities to protect supply chains, technical human resources, and financial structures capable of enduring long-term investments must be evaluated together.

Ryu (CEO) stated, "Capital crosses borders, but the industrial capabilities generated by facilities, technical workers, and supply chains cannot be easily moved," adding, "We do not need to follow the same path as the U.S. and Britain, who realized this truth too late, and pay the same costs."

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*This content was translated by AI.