Emphasis added to this story about a “governance landmine” that illustrates the problem with governance structure that is overweighted in favor of the CEO.
JD.com shareholders just got an abrupt reminder about their investment. Richard Liu, the founder and chief executive of the $45 billion Chinese e-commerce company, was arrested in the United States for alleged sexual misconduct and released. Even if he is cleared – JD says the accusation is “unsubstantiated” – the episode renews questions about corporate governance and the use of legally untested structures.
In what Minnesota authorities call an active investigation, there are many implications for JD. First, the #MeToo movement against sexual harassment and assault has been gaining traction in Asia. The allegations could put off JD employees and customers.
Second, it is not entirely clear how JD might operate if Liu is detained or incapacitated for a long stretch. Liu owns a 16 percent economic stake in the company, but controls 80 percent of the vote thanks to a feudal shareholder system that was cemented in the 2014 initial public offering. It means even heavyweight backers such as Tencent, Walmart and Alphabet’s Google have limited say.