Hkex President wrote about institutional innovation Good alibaba were instructed

the Hong Kong stock exchange (hereinafter referred to as the “exchange”) Mr Li, chief executive of published today is called the dream after the talk Where does that leave – equity structure eight asked eight “of the article. , he pointed out that “creative” technology company under the good system design, control and public shareholders can reconcile. At the same time, he by Facebook, Google, apple and other companies, for example, that the founder for the importance of “innovative technology companies. , according to the personage inside course of study to the hunting cloud network analysis in the backdrop of the listed in alibaba, Mr Li published article is considered to alibaba, ‘and’ actively, alibaba hong kong-listed or master.

here is the original article:

since the last time I was in a blog post “dream about” investor protection, appeared on the market for more discussion of ownership structure of listed companies, this is a good thing. However, we can’t just stay in with a voice in my dream, need more courage to face the problem in reality, the common take on the role of “a eucalyptus Sir”. Today, I would like to try to answer the market some hot problems, to share my perception of investor protection and ownership structure. In order to avoid unnecessary misunderstanding, the following represent only my personal point of view.

q: discussion of ownership structure and investor protection seems to have come to an end, why do you revive again?

a : in the fierce debate last week, the parties are free to express their own opinions. Some friend won a cheerful spirit of victory, feel good; There are some friends disappointment and regret. But the problem is that everyone in the said to yourself, do not necessarily have a listen carefully and analyzed each other’s speech, also do not have enough efforts to seek consensus in so many different sounds.

face how to greet the new Hong Kong finance economy brought the historical opportunity of the major issues, we still didn’t answer eucalyptus. In the next wave of new economy, will occupy a considerable proportion of innovative companies in China. For Hong Kong, losing one or two of the listed company may not be a big thing, but to lose a whole generation of innovative technology company is a big deal, but without serious argumentation and advisory company missed a generation of new economy is a big regret.

in my opinion, the problem about the public interest of Hong Kong, and is imminent, not escape. This needs we have to assume, have the courage to look for a further eucalyptus, otherwise, it wasted a big opportunity for the Hong Kong market plan for the future. Therefore, I decided on this first tell my humble opinion, hope that topic and lead to more insight reason and wisdom for this problem, find a best answer eucalyptus for Hong Kong.

q: what is the difference between a innovative company with traditional and why are they worth investors to give new thinking on corporate governance mechanism?

a : innovative company and the difference from the traditional company, it is the key to success is not depends on capital, assets or policy, but by the founder’s unique dream and vision. Review these innovative company growth, we is not hard to find, every great business plan initially originated from the founder of a great dream. Apple’s success stems from Steve jobs a dream of the personal computer to change the world, Facebook’s success was a result of zuckerberg hope to Internet change the way people communicate, dream, Google’s success was a result of page and brin want to link the whole dream downloaded from the Internet. The founders of the great dream, and creative achievements in the innovative company, became the most important core assets. To this kind of company, there is no doubt that the founders should more than anyone to cherish their own “children”, more concerned about the company’s long-term healthy development, is also precisely as a result, many investors immediately in this company.

there is an important part of the common characteristics of innovative company, they had no money, is their startup founder to angel investors, venture capital and private equity funds and other financing to realize their dreams, which makes their stake in the company constantly diluted; Once listed companies, their equity will fall further, as the company’s development direction of the helm position will be under threat. In the company’s long-term interests and short-term interests conflict, they may even be easily ejected from the board of directors.

in order to encourage innovation, in order to protect the core of these innovative company with lasting competitiveness, leading the international market and many institutional investors have been in this field for new thinking and balance, they think, founder of a certain space and opportunity at the helm, be helpful for the long-term development of the company, is also an important content to protect the interests of the public investors.

q: give an innovative company founder must control and protect the interests of the public shareholders is a pair of irreconcilable conflict?

a : under a good system design, they are not incompatible. Founder of the system design is the key to control of the size must match the market mechanism of checks and balances and error correction, in order to reduce the founder because of bad decisions or abuses and other shareholders bring losses to the company. Great founder is can create a great company, but to become the founder of the fall can also make a great company. Checks and balances and error correction mechanism is essential, therefore, a market in the stronger checks and balances and error correction mechanism, to the control of the can, the greater the founder and vice versa.

q : in the status quo and double equity between these two extremes, whether there is any other possibility?

a : for this problem, market opinion, suggestion is very much also, from the simplest insist with shares with right to the most extreme double equity.

the simplest possible is to maintain the status quo, the founder for corporate control did not receive any form of special powers, but it is not without cost. If you want to select this option, Hong Kong can keep the traditional corporate governance mechanism is pure and simple, easily occupy the moral high ground, but could also mean that Hong Kong voluntarily gave up a large number of leading the trend of innovative companies, and lose our market core competitiveness in the future.

and contrast with the status quo, at the other extreme is to allow the voting power of the listed companies with different classes in two or three shares (that is, the founder of votes of the shares held by the above stock to the public the right to vote). This kind of system in the United States and many European overseas market operation for many years, Facebook and Google and other big IT listed companies adopt this kind of multilayer structure.

however, I’m afraid if Hong Kong want to introduce this system will be controversial. Proponents argue that Hong Kong should be disclosed to to give priority to the mature markets of striding, free markets and investors, while opponents believe that this is Hong Kong in the back, because the huge difference between Hong Kong and overseas market, Hong Kong’s small and medium-sized investors cannot compete effectively with the strong big shareholders.

there are many different between these two extremes, but the most representative watershed is whether to give most founder to nominate directors.

founder of one side of the watershed can be allowed or team shall have the right to nominate the board of directors of the minority (for example, three seats, 9 seats in four of the seven seats in seats, etc.), and the appointment of executives has certain influence. Proponents argue that this arrangement will not cause any substantial to existing with shares with right system change, also can make on the system remain important influence on the company founder, need not worry will be strong shareholders united play the board of directors at any time. Common sense won the arrangement of the key lies in how to establish the founding shareholders for executive appointed (especially), chief executive of the influence of the regulators need to design a sophisticated system arrangement, both security and the stability of the team at the helm of the company founder, is the basic principle of the same stock rights have a material impact.

the other side of the watershed is to make the most of the founder or team can nominate board, but the shareholders meeting can veto the founder of the nomination. In addition, share all with with the right. Supporters say such mechanism can make the founder through nomination for the majority of the directors, the control system for the company, but opponents think it can make the founder at very low cost to realize effective control of the board and the whole company.

there are likely to make both sides to reach a consensus is the key to the nomination system error correction capability and validity. If the founder’s nomination was repeatedly shareholders voted down can still continue to nominate, control that this may have caused the actual stock with different rights; If this nomination veto in the general meeting of shareholders is permanently disappear after one to two times, this makes the founder extremely serious consider nominations for shareholder support. At the same time, when the other shareholders and the founder of a major conflict on the fundamental interests and other shareholders can use once or twice veto will withdraw this privilege, such an arrangement can greatly reduce the system could be abused and controversy.

q : if the market reached a consensus to make some changes to the existing system, we should how to ensure that the program righteousness?

a : if you choose to maintain the status quo, I hope is made after careful argumentation and considering the initiative choice, rather than because of under pressure, afraid of controversy or lazy to and as a result of, because it’s about the future of Hong Kong.

if we consider the revised listing policy and rules, you should choose according to the amplitude of the revision of the corresponding to promote prudent procedure. Slight changes might need to regulators to exercise discretion; And larger changes may need to be done prior to the personage inside course of study some “Soft Consultation” (Soft Consultation) make decisions more considerate; Greater reform must be thoroughly market advisory, some even need to pass legislation.

of course, in reality to discuss the situation might be more complicated than these, need careful analysis. In short, no matter choose anything, we must be careful and objective procedure, embodies the legal dignity and procedural justice.

q: now hot “partner system” is a feasible way listed?

a : to be honest, I don’t understand the problem and what is the equity governance mechanism of listed company of our discussion necessarily logical relations.

in the traditional sense of “partnership” with corporations are two completely different corporate governance mechanism, it is hard to imagine how to put them together:

partnership is one person one vote, constrained by the contract between partners; The company type is a vote, through the company’s articles of association between the shareholders, the company law and other “standard contract” to define the rights and obligations;

partner this group is made up of a contract between constraint, who in the agreed by the partners and decision, thus to enhance the value of partners, inheritance, and so on; And corporations under the equity depends on the investment proportion, the relationship between the shareholders rely on “standard contract” to regulate shareholders by buying and selling the freedom in the market. It can be said that the former is the rule of man, the latter is the rule of law.

can be used based on the equity of listed companies corporate governance mechanism, regulators will not also can’t in the system of listed companies will this not compatible “water” and “oil” together.

under the governance mechanism of listed companies, regulators focus on the shareholders, directors and management powers and duties of the relationship between the three kinds of people, whether to belong to partner has nothing to do with it. Of course, part of the shareholders, directors or management can organize partner companies or other organizations to maintain the common pursuit of a specific values and the management idea, but this is not a listed company the focus of regulators. When the organization form of such influence to the operation of listed companies, regulators would require appropriate to disclose.

q : if markets agree to Hong Kong as an innovative company to make some rules to revise, how we respond to what is suitable for the applicant to make the limit?

a : if agreed to give the market some innovative company founder shareholders some special rights, these rights should be applied only to limited.

for example: the company must be representative of the new economy is an innovative company, because this is the starting point of the discussion, “exceptions” this system is not designed for other traditional company; And, of course, also need to have what is a “new economy”, “innovative company” a more accurate definition;

getting such limited rights must be founder or founding team, because this is also the starting point of discussion, the system “exceptions” should not be arbitrarily transferred or inheritance;

the founder must be shareholders and hold a certain stock, because of the discussion is based on the rights of the shareholders, to ensure the overall and long-term consistency of founder and shareholder interests; Once the founders or founding team shares dropped to a certain level, in the hands of a “exception” is also this system shall be null and void automatically.

in addition, also can consider applying minimum value or circulation conditions, to ensure that these companies have a number of mature institutional investors to supervise these special rights will not be abused. Such restrictions can also have a lot of eucalyptus, but all in all, not all companies, everyone can enjoy special rights.

it is worth mentioning here, the system of “partner” itself can be a condition? As mentioned earlier, “partner system” is the company’s own incentive talents, retain talents and the pursuit of specific values of the management system, market regulators shall not be obliged to comment on its advantages and disadvantages, but it should not be standing with the company’s equity system for a talk. If “partner” can meet the requirements of lists, such as they are innovative company founders or team, and is holding shares of shareholders, it could be considered, otherwise we are not, whether the applicant adopts the system of “partner”, there is no causal relation.

q : as the chief executive of the Hong Kong stock exchange group, the last time you comments have drawn some criticism, think you for the Hong Kong stock exchange the self-serving, even some people think that you are in for individual escorting company listed, the hairnet volunteers are not afraid of fire you?

a : I’m not afraid, because the purpose of this blog is published to the public interest of Hong Kong, the public interest is more than one company to Hong Kong.

what is the public interest? In my view, it first including Yang spirit of rule of law and defending procedural justice, maintain the fair, fair and open market and order; nullnullnullnullnull