As Alibaba Group Holding launches its massive U.S. initial public offeringthat could raise more than $20 billion, the Chinese e-commerce giant’s long-term vision will depend on its so-called partners who effectively control the company.
The 30 partners – including Alibaba founder Jack Ma and many other senior executives – have the right to nominate a majority of the company’s directors. The three new partners, who have all been at Alibaba for more than a decade, are principal engineers Cai Jingxian and Ni Xingjun as well as human resources director Fang Yongxin.
“Our partnership is a dynamic body that rejuvenates itself through admission of new partners each year,” Alibaba says in its IPO filing. Existing Alibaba partners can propose candidates who have worked at Alibaba for at least five years. To become partners, candidates need to be approved by at least 75% of all the existing partners. One of the criteria for election is “a track record of contribution to the business of Alibaba Group,” according to the filing.
So what contributions have the three new partners made?
Cai, a 37-year-old who joined Alibaba in 2000, is one of the engineers who played a major role in creating the Taobao online marketplace in 2003. Taobao is Alibaba’s main website that hosts millions of merchants. Cai is now in charge of Alibaba’s cloud computing platform called Aspara. Ni, 37, joined Alibaba in 2003 and helped develop Alipay, an electronic payment system that processes most of the transactions on Alibaba’s e-commerce websites. Fang, who joined the company in 2000, has supervised human resources management in many business areas and key geographic regions in China.
Alibaba’s partnership structure has raised questions among some investors and corporate governance experts, because it allows a group of executives who only hold a minority stake in the company to effectively control the board. Alibaba decided to go public in New York in part because Hong Kong’s stock exchange didn’t accept the structure. Structures that allow senior executives to have more control over listed companies aren’t rare. Some major U.S. technology firms, such as Google and Facebook, issue two classes of shares with different rights to give their founders and management greater weight in shareholder votes.
“Unlike dual-class ownership structures that employ a high-vote class of shares to concentrate control in a few founders, our approach is designed to embody the vision of a large group of management partners,” Alibaba says in its IPO filing.