Richard Li Tzar-kai burst onto the hi-tech stage with a bang. But he's going out with a whimper - and a heap of unanswered questions about Hong Kong's corporate governance standards. After years of trying to establish itself as a credible global financial centre, the way in which Mr Li's sale of his stake in PCCW has been managed shows that Hong Kong in many senses remains a small town run by an elite group that feels free to act with impunity.
To act as if this sale of a controlling shareholding in Hong Kong's dominant telecom company is a normal commercial transaction stretches credulity. The sale comes after weeks of overt political meddling by Beijing, which acted to block a proposed sale of company assets despite any clear legal basis to do so.
Now, presumably to mollify Beijing, control of PCCW is being handed over to a trusted adviser to the Li family, Hong Kong's richest, who says he has no interest in actively managing the company. The transaction is being financed on extremely attractive terms by none other than a company controlled by Richard Li himself. Meanwhile the board, which is entrusted with looking after shareholder interests, has been silent on offers by two different private equity firms to buy most of the company's assets at a premium to the price that investment banker Francis Leung Pak-to paid.
From the time Mr Li took over a shell company and used it to raise money from eager speculators in the dotcom frenzy through his audacious purchase of Hong Kong Telecom, until his bizarre recent attempt to sell the bulk of the company's assets to a private equity company, Mr Li has often seemed to play by his own rules. His brazen attempt to sell off most of PCCW's assets, leaving China Netcom and other shareholders with only the rump of a company, was daring even by Mr Li's standards. Shareholders, including Netcom, had every reason to be angry.
But Mr Li underestimated the political repercussions of his plan to raise cash with the asset sale. Politics had much to do with his success in defeating Singapore Telecom's bid to acquire Hong Kong's leading telecom company in 2000. And politics kept Mr Li from cashing out of PCCW in quite the way he would have liked.
Now, with Mr Leung taking control of Mr Li's stake, it appears a foregone conclusion that the two foreign bids to buy PCCW's assets will be rejected. But minority shareholders, who own more than half the company, can understandably wonder why they shouldn't have the chance to take advantage of a higher offer. Perhaps PCCW's board will provide an answer in due course. The deal with Mr Leung was clearly engineered with the sole purpose of scuttling a prospective assets sale that would have delivered higher returns to PCCW. For a major shareholder and director of a company to partake in an exercise that has the effect of reducing the potential benefits accrued to all shareholders raises serious corporate governance issues.