Until recently, Alibaba was in dialogue with Hong Kong capital markets regulators on how to translate our guiding philosophy into a form of corporate governance in connection with a potential listing on the Hong Kong Stock Exchange. As a company with most of our business in China, it was natural for Hong Kong to be our first choice.
We proposed a governance structure that would enable Alibaba’s partners – key people who manage our businesses – to set the company’s strategic course without being influenced by the fluctuating attitudes of the capital markets so as to protect the long-term interests of our customers, company and all shareholders.
It has been said that Alibaba threatens the “one-share-one-vote” principle. Nothing is further from the truth. We never made any proposal that involved a dual-class shareholding structure. A typical dual-class structure allows those who hold high-vote shares to out-vote the rest of shareholders on all corporate matters. Our governance structure preserves significant rights of shareholders, including the unfettered rights to elect independent directors as well as rights to vote on substantial transactions and related party transactions.
Why do we insist on our governance structure? Our overarching objective is to maintain the Alibaba culture. For the past 14 years, Alibaba operated with the ethos of helping the “small guy” to succeed, as embodied in our mission: “to make it easy to do business anywhere”. This clear sense of mission, long-term focus and commitment to values defines the “Alibaba culture” and it is what makes us successful.
At the same time, we have also noticed that many great companies quickly deteriorate after their founders leave; in the same vein, a number of successful founders have also made fatal mistakes. The final governance structure we have selected is to replace founders with partners. The reason is simple – a group of partners who cherish the same culture and ideals is more likely to carry forward our principles and make good decisions for all stakeholders with a long-term view. And in the decade to come, those partners will be guided by these principles when grappling with inevitable disruption and competition.
We believe this partnership system is the right way to build a sustainable business: partners are peers and, without bureaucracy or rigid hierarchy, they solve problems through collaboration. Partners are not just managers but they are owners of the business with a keen sense of responsibility. The partnership is rejuvenated each year through admission of new partners and, as such, it provides both continuity and longevity because it is a living body. With this system, we believe we can sustain the flame of innovation and constantly improve the talent pool of people who run the Alibaba business.
Those who lack appreciation of our partnership philosophy may view our proposal merely as a founder wanting to preserve control. We could not have a more different objective. Over the past 14 years, we have never sought to control this company through the shareholding structure and we will not begin to do so now. What we want to establish is a mechanism to safeguard the Alibaba culture and we hope that the company’s future is sustainable beyond the life of any one founder. (In fact, Alibaba did not have one or two founders, but 18 founders. In a sense, we have operated as a partnership from Day One.) Our hope is to achieve a mechanism for safeguarding the development of the company “to last 102 years,” i.e. spanning at least three centuries starting from 1999, the year we were founded.
As the largest e-commerce marketplace operator in the world and a custodian of a US$150 billion ecosystem of consumers, merchants and business partners, our commitment to openness, transparency, sharing and responsibility is at the core of our value system.
We fervently believe maintaining an innovative culture and company mission are the essence of success in this disruptive world we operate in. Our governance structure is a creative way to address the core issues that matter to shareholders while staying true to who we are – which we cannot, and will not, change.
As an e-commerce company, we are deeply aware of the disruption that is brought about by the Internet across all industries, and the capital markets are not exempt from this disruption. As a social enterprise, we will strive to drive and promote this type of innovation. We welcome a debate about models of good governance for a business like ours in the 21st century.
We understand Hong Kong may not want to change its tradition for one company, but we firmly believe that Hong Kong must consider what is needed in order to adapt to future trends and changes. The question Hong Kong must address is whether it is ready to look forward as the rest of the world passes it by.
JoeTsai is a co-founder and Executive Vice Chairman of Alibaba Group