HKEx won’t kowtow to Alibaba
The largest e-commerce business in the world, estimated by some analysts’ to be worth $120bn, is set for the most anticipated IPO since Facebook’s float last year. Thought Alibaba initially intended to go public on the Hong Kong Stock Exchange (HKEx) this is now more likely to happen in the US, where company law allows dual-share share structures.
The group of founders and partners that currently controls the company would, namely, like to uphold a corporate governance structure based on a partnership system, while the senior management would have the right to nominate a majority of board members – a kind of dual-class stock structure. Alibaba’s founders argue that this is necessary in order to preserve the company’s culture and protect it from becoming victims of short-term market demands. While Google and Facebook also use A/B share structures for similar reasons, this is not allowed under the corporate governance rules in Hong Kong, which sets out that “all holders of listed securities are treated fairly and equally”.
The potential profits from a $15bn floatation exposed HKEx’s inherent conflict of interest as a profit–making company and a market regulator. Though HKEx tried to find a way around its own Listing Rules it got under pressure by the Asian Corporate Governance Association to stand firm. The HKEx is already losing ground to Shanghai and Shenzhen exchanges, which is why retaining the reputation for quality regulation, rule of law and good governance is so important. By refusing to bow to Alibaba’s demands the HKEx has seemingly put its high standards of corporate governance before profits.