Governance and Ethics in Alibaba Group Holding Limited: A Report

This report provides an analysis of the governance and ethics of Alibaba Group Holding Limited, focusing on its board structure and the challenges it faces. The report examines the structure of Alibaba's board, highlighting the control held by the 'Alibaba Partnership' and the potential governance risks for public investors. It delves into problems arising from the Alipay case, where the interests of Mr. Jack Ma may not align with those of Alibaba, and the implications for future transactions. Additionally, the report explores the duties of Yahoo! executives as directors on Alibaba's board, including their role in the company's listing and the subsequent decisions regarding the tax implications of its stake in Alibaba. The report references external sources to support its findings and provides a comprehensive overview of the governance and ethical considerations within Alibaba Group.

Running head: GOVERNANCE AND ETHICS
GOVERNANCE AND ETHICS
Name of the Student
Name of the University
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Table of Contents
Alibaba Group Holding Limited......................................................................................................2
Answers based on the case study.....................................................................................................2
Answer 1..........................................................................................................................................2
The Board structure in Alibaba Group Holding Limited.............................................................2
Answer 2..........................................................................................................................................3
Problems existing in Alibaba’s board with reference to Alipay case..........................................3
Answer 3..........................................................................................................................................3
The duties of the Executives of Yahoo! As directors on Alibaba’s board..................................3
References........................................................................................................................................5

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Alibaba Group Holding Limited
The Chinese company named, Alibaba Group Holding Limited, is an E-
Commerce company, which is engaged in providing, business-to-consumer, business-to-business
and consumer-to-consumer services of sales through the web portals ("Alibaba Group", 2017). It
is also engaged in providing payment services through electronic devices, services relating to
data-centric cloud computing and a search engine related to shopping.
Answers based on the case study
Answer 1
The Board structure in Alibaba Group Holding Limited
In the Alibaba Group Holding Limited, the control is assumed to be secured permanently,
by the insiders’ group, who are recognized as ‘Alibaba Partnership’. Either they are the managers
of Alibaba Group or other companies that are related (Trong 2012).
The Partnership of the said company would have an exclusive right of nominating the
candidates for the majority of board seats. In addition, if a Partnership does not succeed in
obtaining the approval of the shareholder for the candidates, this would lead in the entitlement of
its absolute individual discretion. Any additional approval of the shareholder would not be
required, for the unilateral appointment of the directors. Therefore, it was made sure that the
appointed directors have the maximum board seats.

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However, one thing that has to be taken into consideration is that, the investors
who intend to take part in the Initial Public Offering of Alibaba must be aware of the possibility
of exposure of danger relating to the substantial governance risks that would be taken up by
them. Alibaba’s structure does not provide adequate protections to public investors. According to
the structure of Alibaba, adequate protection has not been provided to the public investors.
Therefore, the shareholders have not been represented adequately on the board based on their
ownership.
Answer 2
Problems existing in Alibaba’s board with reference to Alipay case
The public investor should not only worry regarding Alibaba’s divestment of Alipay
which benefited Mr. Jack at the cost of Alibaba, but also regarding the conditions of the
upcoming transactions between Alipay and Alibaba. As Alibaba depends on Alipay for the
purpose of conducting significantly all the payments being processed in the marketplace, the said
terms are significant for the future success of Alibaba.
Mr. Jack Ma holds a large portion of the equity capital of Alipay, than the equity capital
of Alibaba, as he would be benefited economically from the conditions that would be
unfavorable to Alibaba. In fact, the initial public investors’ prospectus acknowledge that John
Ma may act for the purpose of resolving Alibaba-Alipay conflict not in favor of Alibaba.

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Answer 3
The duties of the Executives of Yahoo! As directors on Alibaba’s board
The founder of Yahoo, Jerry Yang played an important role in the listing of Alibaba. The
duties of the executives of Yahoo were fulfilled as the directors on Alibaba’s board. Yet after the
refusal of Internal Revenue Service in the month of September for granting its approval of tax-
free by-product or result, that has been recommended to Yahoo’s for the $32000000000 stake in
Alibaba, the Chinese massive E-commerce company. The CEO of Yahoo, Marissa Mayer was
confident to go ahead with the proposed deal. In the later part of October, Ms. Marissa, the chief
executive of Yahoo, said that the preparation was on, and the planning was ongoing, to the
shareholders.
However, the previous week, when Board of Yahoo met for reviewing the January
spinoff that was designed, it decided to cancel the deal. On the following Wednesday, it was
announced by the board that a result of its central business of Internet would rather be pursued
by Yahoo, departing from the stock of Alibaba in the former company.
While the Boards of Yahoo said that as earlier, it assumed that the company would be
prevailing in any of the disputes related to tax, several individuals on Wall Street were concerned
about daring Sam Uncle over a likely $10000000000 tax bill was a huge risk, furthermore the
worries were discouraging stock prices of Yahoo. It was apparent that a certain amount of
uncertainty was caused in the market.

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Figure 1: Tracking the IPOS
(Source: Rosier 2014).
References
Alibaba Group. (2017). Alibabagroup.com. Retrieved 21 October 2017, from
http://www.alibabagroup.com/en/about/overview
Rosier, K. (2014). The risks of China’s internet companies on US stock exchanges. US-China
Economic and Security Review Commission Staff Report, 18.
Trong Tuan, L., 2012. Corporate social responsibility, ethics, and corporate governance. Social
Responsibility Journal, 8(4), pp.547-560.