September 10, 2018 / 6:40 AM / 2 months ago

Breakingviews - Jack Ma's exit plan just raises more questions

Alibaba executive chairman Jack Ma talks to young entrepreneurs and students at the University of Nairobi in Nairobi, Kenya, July 20, 2017. REUTERS/Thomas Mukoya

HONG KONG (Reuters Breakingviews) - It’s one step forward, and two steps back for Alibaba. Three days after co-founder Jack Ma told a journalist that he planned to step down, the $420 billion e-commerce group confirmed that Chief Executive Daniel Zhang would succeed him as executive chairman in 2019. That’s laudable forward planning. And yet Monday’s official pronouncement raises as many governance questions as it answers.  

Unlike many Chinese tech bosses, Ma, now 54, has actually bothered with succession: first building up an executive team, and then pulling back. The English teacher turned corporate titan will step down from his executive chairman role in exactly a year. He will stay on the board for longer to ensure a smooth transition: until his term expires in 2020, according to a letter to employees, customers and shareholders.

That certainly clears up some confusion. Ma left investors guessing after he told the New York Times, according to an article published on Friday, that he would retire to focus on philanthropic work. Alibaba-owned South China Morning Post followed up, citing a spokesman who said Ma’s comments had been taken out of context.

Still, the plans leave plenty of concerns. For a start, counter to corporate governance best practice, Zhang will hold both the positions of chairman and chief executive. That’s hefty concentration, given the 46-year-old already sits on the powerful Alibaba Partnership, a 36-member group of executives that nominates the majority of the board, as well as the even more exclusive Partnership Committee, in charge of nominating new partners and determining their bonuses. 

More worrying is the lack of clarity around Ma’s nebulous influence after 2020. He will have no official title, but will remain a lifetime member of both the Alibaba Partnership and the Partnership Committee. That will give him considerable clout on board-level issues, and in more ambiguous tasks, like preserving the company’s culture and vision. That’s unwelcome opacity for shareholders.

How the change will affect Ma’s role with Alibaba affiliates including payments and financial services arm Ant Financial is also still unclear. The $150 billion fintech giant is controlled by Ma personally, and has joint investments with the e-commerce group. And yet it is curiously absent from Monday’s statement – as is the word “retirement”.

Breakingviews

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