December 27, 2018 / 1:20 AM / 24 days ago

Breakingviews - Asia’s tech titans face Nissan-style key-man risk

Passersby are silhouetted as a huge street monitor broadcasts news reporting ousted Nissan Motor chairman Carlos Ghosn's indictment and re-arrest in Tokyo, Japan December 10, 2018. REUTERS/Issei Kato

HONG KONG (Reuters 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.

Ghosn’s key-man status was clear to investors and fellow executives, but his abrupt departure from the Japanese automaker came as a shock anyway. It was a similar story at e-commerce giant JD. There, founder Richard Liu coveted control as both chairman and chief executive: the board was barred from making decisions without him. A rape allegation and brief arrest called into question his reputation and role; JD’s stock lost around a third of its value.

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’s Terry 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.

- This is a Breakingviews prediction for 2019. To see more of our predictions, click reut.rs/2R6H5pG

Breakingviews

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