Chinese companies struggling with how to disclose the departure of top executives amid a nationwide crackdown on corruption are adopting the favored euphemism of US corporations: personal reasons.
On Saturday last week, China Minsheng Banking Corp (中國民生銀行) cited “personal reasons” for the resignation of its president as Chinese media outlets reported that he was under investigation by authorities.
A month earlier, developer Kaisa Group Holdings Ltd (佳兆業集團) said that its chairman was quitting for “health reasons,” triggering a default on one of its loans, local media outlets reported.
However, the company is being investigated for links to a former Shenzhen security official who is being probed for alleged corruption, two people familiar with the matter have said.
Chinese President Xi Jinping (習近平) is waging the broadest crackdown on corruption in the nation in decades, leaving publicly traded companies scrambling for precedents in what and how they should disclose.
More than 70 top executives at state-owned enterprises were busted last year, according to the People’s Daily, including some with listings in Hong Kong.
“Companies are seldom forthcoming about the reasons that a director or chief executive has quit,” David Webb, shareholder activist and founder of Webb-site.com, said in an interview. “It is quite comical because a whole group of them simultaneously or in quick succession resigns for the same reason.”
Minsheng said the resignation of its president would not affect the company’s operations. A Kaisa spokesman declined to comment.
Webb offers a handful of other examples from recent years: Samling Global Ltd’s (三林環球) company secretary left in 2011 for “personal reasons” that resulted in a 12-year prison sentence for fraud and money laundering. VST Holdings Ltd’s (偉仕控股) chairman left for “personal reasons” in 2012 that led to a six-month jail sentence for stock-price rigging.
In 2012, China Glass Holdings Ltd (中國玻璃控股) said an independent director quit due to “health conditions and other personal reasons,” which turned out to include a corruption charge relating to another company. He was acquitted last year.
This is not a new problem. In May 2007, the Hong Kong Stock Exchange and the Hong Kong Institute of Directors called on listed companies to be more forthcoming.
“Detainment by the police or other authorities,” does not qualify as personal, they said.
Just a month later, the Chinese state-owned oil refiner China Petroleum & Chemical Corp (中國石油化工), more commonly known as Sinopec, said that then-chairman of the board Chen Tonghai (陳同海) was leaving for “personal reasons.”
State media reported that he was being probed for corruption; he was later given a suspended death sentence for taking 196 million yuan (US$31.4 million at current exchange rates) in bribes.
In 2008, Gome Electrical Appliances Ltd (國美電器) — then China’s biggest electronics retailer — initially denied reports that billionaire founder Huang Guangyu (黃光裕) was under investigation by authorities.
Even after Beijing police officials confirmed that China’s richest man at the time was being investigated for “economic crimes,” a company spokesman insisted: “You should take information on the stock exchange as the correct information.”
Huang was sentenced to 14 years in prison in 2010 for bribery and insider trading.
Opaque resignations have “been a sore point for Hong Kong-listed issuers,” Michael Cheng (鄭孟揚) of the Hong Kong-based Asian Corporate Governance Association said in an e-mail. “This is certainly something that the Hong Kong regulators should take another good look at.”
In 2012, the Securities and Futures Commission of Hong Kong was given the power to levy civil sanctions for failure to disclose price-sensitive information in a timely manner. The commission declined further comment.
The situation is not always clear-cut, Cheng said, as corruption investigations are often done in secret or covered by statutory secrecy, as in the case of Hong Kong’s graft-busting agency, the Independent Commission Against Corruption.
Hong Kong’s overlap with China creates a potential loophole. If an investigation is happening in mainland China by Chinese authorities, Hong Kong executives and regulators may not have been notified — or even aware of what is going on.
Some firms are trapped in a catch-22, Cheng said, where they are forced to suspend trading because they cannot disclose confidential investigations.
“Without such disclosure the stock exchange does not allow them to resume trading,” Cheng said. “Hence, a stalemate.”
MULTIFACETED: A task force has analyzed possible scenarios and created responses to assist domestic industries in dealing with US tariffs, the economics minister said The Executive Yuan is tomorrow to announce countermeasures to US President Donald Trump’s planned reciprocal tariffs, although the details of the plan would not be made public until Monday next week, Minister of Economic Affairs J.W. Kuo (郭智輝) said yesterday. The Cabinet established an economic and trade task force in November last year to deal with US trade and tariff related issues, Kuo told reporters outside the legislature in Taipei. The task force has been analyzing and evaluating all kinds of scenarios to identify suitable responses and determine how best to assist domestic industries in managing the effects of Trump’s tariffs, he
TIGHT-LIPPED: UMC said it had no merger plans at the moment, after Nikkei Asia reported that the firm and GlobalFoundries were considering restarting merger talks United Microelectronics Corp (UMC, 聯電), the world’s No. 4 contract chipmaker, yesterday launched a new US$5 billion 12-inch chip factory in Singapore as part of its latest effort to diversify its manufacturing footprint amid growing geopolitical risks. The new factory, adjacent to UMC’s existing Singapore fab in the Pasir Res Wafer Fab Park, is scheduled to enter volume production next year, utilizing mature 22-nanometer and 28-nanometer process technologies, UMC said in a statement. The company plans to invest US$5 billion during the first phase of the new fab, which would have an installed capacity of 30,000 12-inch wafers per month, it said. The
Taiwan’s official purchasing managers’ index (PMI) last month rose 0.2 percentage points to 54.2, in a second consecutive month of expansion, thanks to front-loading demand intended to avoid potential US tariff hikes, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. While short-term demand appeared robust, uncertainties rose due to US President Donald Trump’s unpredictable trade policy, CIER president Lien Hsien-ming (連賢明) told a news conference in Taipei. Taiwan’s economy this year would be characterized by high-level fluctuations and the volatility would be wilder than most expect, Lien said Demand for electronics, particularly semiconductors, continues to benefit from US technology giants’ effort
‘SWASTICAR’: Tesla CEO Elon Musk’s close association with Donald Trump has prompted opponents to brand him a ‘Nazi’ and resulted in a dramatic drop in sales Demonstrators descended on Tesla Inc dealerships across the US, and in Europe and Canada on Saturday to protest company chief Elon Musk, who has amassed extraordinary power as a top adviser to US President Donald Trump. Waving signs with messages such as “Musk is stealing our money” and “Reclaim our country,” the protests largely took place peacefully following fiery episodes of vandalism on Tesla vehicles, dealerships and other facilities in recent weeks that US officials have denounced as terrorism. Hundreds rallied on Saturday outside the Tesla dealership in Manhattan. Some blasted Musk, the world’s richest man, while others demanded the shuttering of his