Alibaba plan shows just how to overcome succession problem

Jack Ma will hand over the reins to Daniel Zhang Yong after a year in a test case for Asian business empires, especially those still dominated by their founders

PUBLISHED : Tuesday, 11 September, 2018, 10:47pm
UPDATED : Tuesday, 11 September, 2018, 11:14pm

Nearly 40 years after China’s opening up, corporate succession planning has become a major issue for the world’s second-biggest economy. The reforms fostered a private sector that expanded at breakneck pace and now drives national economic growth and job creation. If the handover to the next generation does not safeguard and consolidate these achievements the national economy will suffer.

Sadly, in the absence of strategic and long-term succession planning, many private companies risk being part of the problem rather than the solution. The Chinese tradition of handing over to the next generation of controlling families can sometimes fall short of market expectations of transparency and accountability.

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Moreover, it cannot be assumed that all the younger ones will share the same driving interest and ambition of their elders, or the same ideas about how the business should be run. That said, there are examples of more open-minded younger generations succeeding in bringing in new styles of management.

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Despite the implications, the issue has tended not to get the attention it deserves. That changed this week when Jack Ma, founder and chairman of e-commerce giant Alibaba – owner of the South China Morning Post – made his company part of the solution with the announcement of a detailed succession plan.

After a transition period of one year, the 54-year-old will hand the reins to chief executive Daniel Zhang Yong. The succession plan is seen as a test case for Asian business empires, especially those still dominated by their founders.

The succession problem is not confined to China but is also to be found in parts of Asia, and in emerging economies generally. Economies can suffer when uncertainty surrounds generational business handovers. The issue also resonates in Hong Kong with its family business structures

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Corporate government concepts enshrined in modern company law remain relatively new to China, especially for enterprises run by families. Examples include relations between board chairmen and chief executive officers, and the role of non-executive directors.

If companies want to sustain growth and competitiveness, they cannot pin all their hopes on one person. That is not to overlook the admiration and respect many people hold for founders now in their 70s who still work very hard in their companies.

This may have worked well in the past. But in terms of sustainable development, timely disclosure of a systematic, well-structured succession plan, especially for listed companies, can give the public more confidence.