World Markets

Asia's tech titans face Nissan-style key-man risk

Reuters

By Katrina Hamlin

(The author is a Breakingviews columnist.)

HONG KONG, Dec 27 ( Breakingviews) - Asia's tech titans face some Nissan-style key man risks in 2019. Startup founders have flourished in the region, taking over where old-school tycoons left off. Yet after Carlos Ghosn and a storm at the top of JD.com, shareholders see audacious leaders as liabilities, too.

Asia should certainly draw scrutiny. Many of its greatest growth stories over recent years have been in the tech sector, where bold, mercurial leaders loom large. The region also boasts a long history of family enterprise controlled by patriarchs: that means a concentration of power can all too easily pass for business as usual.

Examples abound, even among recently listed companies like electric-car maker Nio, where William Li holds the two top jobs and outsized voting rights. As those companies mature, they can recalibrate: founder Jack Ma's handover at Alibaba may provide a model for others.

When they don't, risks rise. A sudden exit by SoftBank's Masayoshi Son or Foxconn'sTerry Gou - maverick bosses and unpredictable decision makers - would leave a daunting vacuum. For both, succession planning is a work in progress. Son has tried it, only to see his heir-apparent lose patience, back in 2016, and leave. Now the 61-year-old says he will spend the next decade seeking a replacement, but won't step down in the near future. Gou, asked by shareholders in June, told them he had no intention of moving on either.

The market finds solutions to circumvent the problem: HSBC, for example, offers local key man insurance policies that pay out as much as 15 times an executive's annual compensation upon their demise. But investors may well demand more this coming year. Already, they are proving to be more proactive on issues like inefficient corporate structures. Overbearing bosses can expect to attract attention for all the wrong reasons.

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CONTEXT NEWS

- Nissan Motor's board fired Chairman Carlos Ghosn, after the industry veteran's surprise arrest in Japan in November. The Japanese automaker has accused Ghosn of using company money for personal use, and says it investigated improper practices for several months.

- The chief executive of JD.com, Richard Liu, was arrested by police in the U.S. city of Minneapolis on suspicion of criminal sexual conduct in August. He was later released and has since returned to China, where he continues to lead the company. The stock closed at $21.1 on Dec. 26, down by 32.6 percent from Aug. 31, the day of his arrest.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Reuters

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