China’s top two online shopping moguls have found themselves dominating the newspaper headlines in recent days, but for different reasons.
Richard Liu Qiangdong, founder of JD.com, was arrested in Minneapolis on Aug. 31 on suspicion of criminal sexual misconduct, police in the US city said last Tuesday. Liu was released after being in detention for about 16 hours, after which he returned to China.
JD.com has said the accusation against Liu was unsubstantiated, and that it is unlikely that he will be charged.
An investigation is ongoing.
Meanwhile, Jack Ma, founder of the world’s largest e-commerce platform Alibaba, has also been in the news, as he has unveiled a plan to step down as company chairman.
The news pertaining to JD.com and Alibaba is totally different, yet both, in their own way, remind investors of the possibility of sudden unexpected news, and the need for firms to always have sound corporate management structures.
The question is this: Is the management of two Chinese firms robust enough to handle the change if the current top leaders are no longer on the scene?
In this regard, Alibaba obviously has a much sounder structure.
Since Ma stepped down as chief executive in 2013 and gave the job to Daniel Zhang, Ma has been increasingly withdrawing from day-to-day operations.
Over the past five years, Alibaba has continued its rapid growth, showing that Zhang and the senior management team are fully capable of steering the firm in the right direction.
Alibaba has a partnership scheme, with over 30 partners including Ma. The group of partners can nominate over half of the directors. Members of the partner group change over time to allow new blood to come in.
Alibaba’s board now has over 10 members, with several independent and external directors including Softbank chief Masayoshi Son and Yahoo founder Jerry Yang.
Therefore, Ma’s decision to step down should not have much of an impact on Alibaba’s business.
By contrast, JD.com has only five board members, and two executive directors. One is Tencent President Liu Zhiping and the other is Liu himself.
Liu represents 80 percent of voting shares with his 15 percent equity stake under a dual-share structure, and maintains tight control over his firm.
Moreover, a provision in JD.com’s articles of association states that no board meeting can be held without Liu.
Such a structure is hardly ideal for a giant listed firm with market value of nearly US$40 billion.
The full article appeared in the Hong Kong Economic Journal on Sept 10
Translation by Julie Zhu with additional reporting
[Chinese version 中文版]
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