Huang Guangyu, the jailed founder of Hong Kong-listed Gome Electrical Appliances, has won a high-profile battle with chairman Chen Xiao for control of China’s leading electronics retailer.
Huang was sentenced to 14 years in prison for insider trading last May, but has been busy staging a boardroom coup from his cell. He tried to oust Chen at a shareholders’ meeting last September, but failed. Then, on Wednesday night, Gome announced that Chen had resigned with effect from yesterday “for family reasons”, and that Sun Yiding, the company’s executive director, had also stepped down from his post, for the same reasons, also with immediate effect.
Zhang Dazhong, a good friend of Huang and founder of Beijing Dazhong Electrical Appliances, has taken Chen’s post, and Lee Kong Wai, a former partner at Ernst & Young, has been appointed as independent non-executive director of Gome, according to a company statement. Gome bought Zhang’s company for Rmb3.6 billion ($550 million) in December 2007.
Chen, who took over as chairman after Huang was arrested in November 2008, survived the bid to oust him last September with a narrow majority of 52%, and many in the media mistakenly assumed that Huang had lost the war.
But Huang, known as Wong Kwong Yu in Hong Kong, is evidently still powerful. He and his wife, Du Juan, own more than 30% of Gome. In a previous intervention he made in late 2010, he added his representative Zou Xiaochun, who is also Gome’s corporate lawyer, and his sister Huang Yanhong, to the executive board of the listed company.
Before that, also from his prison cell, Huang managed to remove three directors from the Gome board and publicly expressed his dissatisfaction with Chen in open letters to shareholders and media, claiming that Chen’s leadership had made the company lag behind rival Suning Appliances.
In an interview with FinanceAsia, Zou said that Chen lacked proper management and business strategies.
The developments at Gome are just the tip of the iceberg when it comes to Chinese capitalism. As a young entrepreneur, Huang built his home-appliance empire from nothing; Gome is a good example of how successful a consumer company can become in a country where urbanisation, living standards and household income are all on the upswing. But Huang’s conviction raises questions about the steps that Chinese business leaders need to take to succeed in highly regulated markets.
Huang was detained in 2008 during a police investigation into allegations of stockmarket manipulation. The investigation gradually grew wider and caught in its net a string of top business and government leaders. Huang eventually received a long prison sentence for insider trading.
Shares in Gome rose 5% yesterday morning following the announcement, but shed some gains in afternoon trading and ended at HK$2.79, 0.7% higher than the previous closing price.
