Photo: Company
Translated by Andrew Vanburen from a Chinese-language piece in Sinafinance
IN A STARTLING move, eight top executives at Hong Kong-listed firms -- mainly CEOs -- suddenly stepped down in a very short timeframe.
What prompted them to throw in the towel and what does it say about the market?
Perhaps even more surprising than the sudden departure of so many handsomely-remunerated executives in such a blitzkrieg-like occurrence is the fact that the reasons given for the parting of ways differ in nearly eight different aspects, but fall into three general categories.
Grand Reshuffle
A CEO stepping down – or being booted – is almost always bad news for the company, and the share price.
And this becomes even more destabilizing if there are no warning bells ahead of time for investors.
Photo: Company
The only sign of trouble was when some of the chiefs fell afoul of major invested funds, while other investors in the know may have noticed dark clouds forming on the horizon on reports of internal struggles or board conflicts.
But overall, the bulk of shareholders in the suddenly leaderless listcos are left struggling to determine whether they should buy the official explanation for the sudden departures, or buy the market rumors swirling about... or perhaps stop buying the firm’s shares altogether.
Generally speaking, official company announcements regarding the departure of a CEO circulate around personal reasons such as the executive’s wish to spend more time with his or her family, or due to unspecified health concerns.
However, the truth is often sandwiched between the official and the unofficial, with actual motives behind a shakeup usually having more to do with disputes between the CEO and the board, or irreconcilable differences of opinion on the proper course to take the company between both parties.
So we are all dying to ask the big question... Who’s quitting where?
At the latest count, some of the eight suddenly rudderless companies include big brand names like Li Ning (HK: 2331) and Yurun Foods (HK: 1068).
In the former’s case, Zhang Zhiyong stepped down from Li Ning, China’s top domestic sportswear brand, after serving two full decades at the post.
Some may say that’s quite a respectable tenure and it’s only natural for the board to seek a fresh face in the boardroom and a younger hand at the helm.
However, Mr. Zhang clearly stepped down suddenly over Li Ning’s recent grand struggles in the marketplace, in a sector which is desperately in need of consolidation and is stymied by chronic overcapacity.
Although the official company statement cited a desire by all sides to bring a fresh management team and style to the Hong Kong-listed retailer, market talk strongly suggests that Zhang and newly invested fund TPG did not see eye to eye.
Equally surprising was the recent resignation of both the CEO and Chairman of Esprit Holdings Ltd (HK: 330).
Ronald Van der Vis, CEO of the apparel giant, quit in mid-June, a move that was following by the resignation of Chairman Hans-Joachim Koerber the following day.
Upon news of the executive exodus, Esprit’s Hong Kong-listed shares plummeted 22% in one day, the biggest drop since October 1997 during the heart of the Asian Financial Crisis.
Personal reasons were again spouted by management for the dual departures, but market talk points to a dispute on company strategy between the two ex-executives and the rest of management.
More direct and to the point was the official company explanation given for the departure of food giant Yurun’s chief Zhu Yicai, citing “differences of opinion” between the former executive and the board.
Also, reports of a series of local government investigations into the activities of NVC Lighting (HK: 2222) chief Wu Changjiang apparently proved too burdensome, leading to his resignation.
Despite management saying the parting was amicable and wouldn’t affect the company’s operations, the share price promptly fell by nearly 20%.
Foxconn International Holdings (HK: 2038), often in the news of late for suspect worker conditions at its Shenzhen plant, recently saw its CEO lose his position.
Graphic design and special effects firm Imagi (HK: 585) saw a similar flight from the top due to “internal disagreements.”
The lesson to be drawn from all these executive exoduses?
Corporations are living, breathing organisms and therefore act in often very unpredictable ways.
In addition, when parts of them fall ill, the whole organism suffers.
See also:
DIAMONDS IN THE ROUGH: Finding Gems In HK’s Trough
MUSICAL CHAIRS: How New CFO Impacts HK Listco
UNDEREXPOSED: German Camera Icon Leica Focusing On HK IPO
BAD APPLES: Hong Kong’s Listing Laggards
Comments
Andrew Vanburen