September 3, 2018 / 10:05 AM / 2 months ago

Richard Liu, high-flying CEO of JD.com, has fostered 'clean' reputation

* JD.com is No. 2 Chinese e-commerce player

* Backed by Walmart, Google, Tencent

* Liu facing sexual misconduct investigation in U.S.

* Founder and CEO has tight control over firm

By Cate Cadell and Adam Jourdan

BEIJING/SHANGHAI, Sept 3 (Reuters) - Richard Liu, founder and chief executive of JD.com, has kept tight control of the business as he takes aim at the likes of Amazon.com , but faces a battle on a new front after being arrested in the United States following an accusation of sexual misconduct.

The Chinese company has said the accusation against Liu, 45, is unsubstantiated. Police in Minneapolis say they are investigating, though Liu was released after a night in jail, and JD.com said on Monday he had returned to China.

But the case is likely to put pressure on Liu, who has a reputation for a luxurious lifestyle but insists on a “clean” company, cracking down on counterfeit goods and corruption.

“I think there is a feeling in the company that we are morally superior to Alibaba,” a company insider said, adding that Liu was “aggressive” but “generally very well liked.”

Liu started the company that would become JD.com in 1998,spending 12,000 yuan ($1,760.54) of his savings to lease a 4-square-metre retail space in Beijing’s technology hub of Zhongguancun.

The firm, also known as “Jingdong,” got its name from a combination of part of Liu’s Chinese first name, Qiangdong, and that of his girlfriend at the time, Xiaojing.

Liu frequently talks up his rags-to-riches story of growing up poor in Jiangsu province. He has said on several occasions that part of his motivation for setting up the firm was to help buy medicine for his grandmother.

At first, the business was focused on opening brick-and-mortar stores selling mostly electronics. But Liu shifted online in 2004 after a SARS epidemic that forced him to shut down many of the locations.

That proved key to JD.com’s rise, culminating in its listing in the United States in 2014. JD.com is now China’s second-largest e-commerce player behind Alibaba, and Liu’s net worth is $7.9 billion, according to Forbes.

He has properties overseas and is married to Chinese internet celebrity Zhang Zetian, often referred to by her nickname, Sister Milk Tea, reported to be about 20 years his junior. They met when Zhang was studying in the United States, married in 2015, and now have a daughter.

LIVELY, COMPETITIVE

A second JD.com insider said Liu was “lively” and highly motivated by competition. The person, who asked not to be named because of the risks of speaking publicly, added that Liu travelled a lot and his lifestyle was seen as “very luxurious” to staff.

In July, he lost a court battle in Australia to keep his name out of a sexual assault trial in which a guest at a party Liu had hosted at his luxury Sydney home in late 2015 accused another guest of sexually assaulting her at a hotel.

Liu was not accused of wrongdoing, according to a court document. The defendant was found guilty of seven offences.

A China-based venture capital manager who has dealt directly with Liu said that “there was nothing in his business dealings that would cause concern” but that Liu had “a high-profile private life.”

JD.com, backed by Walmart Inc, Alphabet Inc’s Google, and China’s Tencent Holdings, did not respond to requests for comment on Liu. Liu could not immediately be reached.

FAMILY MAN

The arrest does underscores a potential fault line in JD.com’s corporate governance. Liu owns a 16 percent stake in the company but controls 80 percent of the board vote, leaving investors with little say.

There is also no clear successor to Liu, who is both chairman and chief executive, even as JD.com faces an escalating battle with Alibaba and has seen its shares fall 24 percent this year. The company posted a second quarter net loss in August.

Liu has long fostered a reputation for good behaviour, playing up JD.com’s tough stance on counterfeits. He has also said he enjoys hard work and dislikes relaxing too much, often working 16-hour days.

He has a sociology degree from Beijing’s prestigious Renmin University and is a delegate to the Chinese People’s Political Consultative Conference (CPPCC), an important advisory body to the government.

The University of Minnesota said Liu was a student in its China-focused doctor of business administration program for senior executives.

Liu said in January at the World Economic Forum in Davos that he enjoys swimming, fast walks and trips into China’s deserts. Once a year he dons a JD.com uniform and delivers packages himself.

He added that integrity was very important to him and that family was one of the things that made him most proud.

“For my parents I want to be a good son, for my wife a good husband and for my daughter I want to be a good father,” he said at Davos. “I hope that one day when I retire that my workers will all be able to say ‘He was a good guy’.” ($1 = 6.8161 Chinese yuan renminbi) (Reporting by Adam Jourdan in SHANGHAI and Cate Cadell in BEIJING; Additional reporting by Shanghai newsroom; Editing by Gerry Doyle)

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