In the English-speaking countries, dispersed ownership has long posed problems for oversight and control of quoted companies. A newer phenomenon is what might be called disenfranchised ownership. The past week saw two fascinating and contrasting examples of this curious form of governance.
The first was Alibaba, the leading Chinese ecommerce company. In its eagerly awaited initial public offering filing in the US, it revealed that a group of 28 managers, six of whom were not even employed by Alibaba and worked only for related companies or affiliates, will have the power to elect the majority of the company’s board.
The second was Britain’s 150-year-old Co-operative Group, a retailing-to-banking conglomerate, which came close to collapse last year. An independent review by Lord Myners revealed that this supposedly democratic consumer co-operative suffered from opaque and byzantine governance, while only one member out of 10,000 was fully enfranchised when it came to appointing directors – despite the group’s claim to give an equal voice to all its 8.1m members.