A WRY joke has been circulating on China’s internet. The founders of the country’s three most prominent technology firms—Jack Ma of Alibaba, Pony Ma of Tencent and Robin Li of Baidu—go for a stroll. One drowns. How would their stocks react? If it were Mr Ma of Alibaba, its shares would fall. If it were Mr Ma of Tencent (no relation), they would remain unchanged. And if it were Mr Li of Baidu, they would rise.
The joke is one small indication of how China’s entrepreneurs-turned-billionaires, symbols of the rise of its internet, engross citizens. They publish collections of their speeches and pen books, such as “Intelligence Revolution” by Mr Li and “China At Your Fingertips” by Tencent’s Mr Ma, and their various pronouncements on how to succeed are memorialised as quotes.
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Lately China’s corporate superstars have given social-media crowds plenty more to parse. The joke proved partially correct about Jack Ma (pictured above): a report that he would abruptly retire, later clarified by the company to explain that Mr Ma would be stepping down as chairman in a year’s time, prompted a decline of 3.7% in Alibaba’s share price. But mostly investors took the news in their stride. To focus on his philanthropic foundation, he will hand over to Daniel Zhang—who lacks Mr Ma’s star quality, certainly, but who has been an adroit chief executive for Alibaba since 2015.
All of which makes for a striking contrast with events at JD.com, Alibaba’s arch-rival in e-commerce. Early this month it emerged that Richard Liu, JD.com’s founder and boss, had been briefly arrested in the American state of Minnesota on a rape allegation. His mugshot circulated and Chinese internet users swapped information on details of America’s legal process. In two days of trading JD.com’s shares fell by 16%, their biggest drop since listing on America’s Nasdaq in 2014, losing $7.2bn of market value. The police investigation is ongoing (Mr Liu has denied any wrongdoing, through his lawyers).
The two events have concentrated minds on a thorny, long-standing problem in Chinese corporate governance: “key-man risk”. Over-mighty technology bosses are a problem elsewhere, but in China opaque legal processes make it much worse, says Jamie Allen of the Asian Corporate Governance Association, based in Hong Kong. China’s global champions employ control structures, built to ensure the founder’s hold is ironclad, that attract criticism at home and abroad.
JD.com is outstandingly bad. According to its articles of association, its board of directors is inquorate without Mr Liu, even if he has been arrested somewhere—a structure “unusual not just in China, but anywhere”, says Mr Allen. The board has only five members, allowing Mr Liu huge clout. Like many other Chinese companies listed in America, JD.com has a “dual-class” share structure, which allows founders to own a special class of shares with superior voting rights. JD.com set the ratio for those weighted voting rights at one share to 20 votes (it is typically half that).
The result is that Mr Liu is able to control four-fifths of JD.com’s voting rights even though he owns less than one-fifth of the stock. JD.com has not convened an annual shareholders’ meeting since its flotation, which it is allowed to do under the lax governance laws of the Cayman Islands, where it was incorporated. Baidu, listed in America in 2005 and also based in the Caymans, has not held one since 2008.
News of Mr Liu’s arrest (on a university campus, while studying for a business-administration doctorate) was a reminder of how few Chinese tech giants have clear succession plans; no one is sure who is his second-in-comman