Chinese e-commerce takes soap-opera turn as scandal surrounds three major players
There is little sign that the recent unwelcome headlines have hurt the bottom lines of Alibaba, JD.com or Dangdang
It’s been tabloid season this week at China’s e-commerce companies, with three giants of the category grappling with the spillover of personal matters into their business operations.
Alibaba, JD.com, and Dangdang spent the week trying to cope with allegations of misconduct among their top ranks.
In the highest-profile among the three, the onetime heir apparent for the CEO position of
was demoted after a public spat between his wife and an alleged mistress, who is also an internet celebrity.
Jiang Fan, head of the company’s e-commerce platforms Taobao and Tmall, was removed as one of 38 partners at Alibaba after an investigation into the dispute between the women found that Jiang himself had “improperly handled his family problems,” according to an internal document that was leaked online.
Jiang was also demoted from senior vice president to vice president, and had a year of his bonus docked, though, as of now, he has retained his position as head of the two online sales platforms.
The scandal emerged when Jiang’s wife publicly threatened internet influencer Zhang Dayi via China’s Twitter-like platform Weibo
telling her to stay away from the Alibaba executive or face unspecified consequences.
Rumors of the alleged affair caused added scrutiny because Alibaba is an investor in a talent agency partly owned by Zhang. Alibaba has long touted its strict corporate and employee ethics policies, even removing its CEO in 2011 after a sales scandal resulting from what was at the time called a “systemic breakdown in our company’s culture of integrity.”
Alibaba said Jiang had not engaged in any improper business dealings, but the company declined to elaborate on the alleged scandal or what it means for Jiang’s future leadership chances.
The news doesn’t seem to have affected Alibaba’s stock performance. Shares have rallied some 15% since their coronavirus bottoming-out a month ago. In fact, U.S.-China tensions were a much bigger concern for some analysts. “We are becoming incrementally cautious on Alibaba,” said Stifel analyst Scott Devitt, due “macro concerns” like the trade war rather than internal reshuffling.
Recent unwelcome news for Alibaba rival JD.com
likewise doesn’t seem to have dented that company’s year-long rally. A U.S. court this week dismissed a motion filed by the Beijing-based retailer to absolve the company of liability in a rape case against its founder and CEO.
JD.com is the biggest threat to Alibaba’s Taobao and Tmall, with customers in China frequently toggling between the competing apps for the best price on the same items.
Company head Richard Liu Qiangdong was arrested in the U.S. in 2018 after a Chinese student at the University of Minnesota accused him of rape. He was later released, and prosecutors eventually declined to indict him due to lack of evidence. However, the student filed a civil lawsuit against Liu and described the company as facing “vicarious liabilities.”
JD.com appealed to have the company cleared from the case, but the Hennepin County District Court said Monday, “It is premature to determine whether the alleged tort occurred within defendant Liu’s work-related limits of time and space.”
“Liu was at the University of Minnesota as a representative of his company,” said University of Minnesota law professor Richard Painter. “The company cannot escape liability for what happened when he was here.”
The company’s shares fell for months as the threat of felony charges hung over Liu. But after criminal charges against him were dropped and the company revealed strong revenue figures, its Nasdaq-listed shares surged 70% over a 16-month period.
Yet during that time, JD has quietly removed Liu from direct roles in dozens of its subsidiaries and affiliates, even as he maintains nearly 80% voting rights in the parent company.
Finally, in perhaps the most bizarre China e-commerce drama this week, the co-founder of onetime Nasdaq darling Dangdang broke into the company’s Beijing offices Sunday and hung up signs claiming he had replaced his estranged wife as the firm’s CEO. Li Guoqing also allegedly took several of the company’s official seals, which Chinese companies are required to have on hand and display.
The problem is that the wife and fellow co-founder, Peggy Yu, owns 64% of the company, which went private in 2016 despite protestation from shareholders, while husband Li has a mere 28% stake. So it is unclear what result his storming the offices will have. The company announced that it had reported the seals stolen and stated that Li was not CEO.
Despite repudiation of Li’s actions through the company’s official channels, Li told the Beijing News that “reclaiming” the seals was only an initial step and that he would be announcing a new management team shortly.
Dangdang did not respond to requests for comment for this article.
Tanner Brown is a writer for MarketWatch and Barron’s and producer of the Caixin-Sinica Business Brief podcast.