Business succession plans are difficult to make, but not not for the most high-profile tech company in China. On Monday, Jack Ma, chairman of Alibaba (BABA), announced he would retire and hand over the reins of the e-commerce giant he founded to the company’s CEO Daniel Zhang next year.
In a letter to the public, Ma, the face of Alibaba, attributes solving the leadership succession puzzle to “a system of governance based on a unique culture and mechanisms for developing consistent talent and successors.”
The partnership program that Ma has been priding himself on has long been a controversial practice in corporate governance. Some researchers have referred to it as “a dictatorship.” While it may ensure a smooth transition of power, some believe the program represents a conflict of interest, lacks independent oversight and public shareholders’ opinions, and could ultimately bring future risks to a company.
Alibaba’s “Lakeside Partners” and politburo governance
Alibaba shareholders do not have the power to elect directors to the board. Instead, this power is vested in the so-called “Alibaba Partnership,” a group currently made of 36 people, who are the firm’s original founding members and senior management. Known as “Lakeside Partners,” they’re named after the location where Ma and his partners started the company in 1999. This board structure enables partners to assert control over a majority of the board, despite their minority equity position.