Founder Firms and Bad Corporate Governance Design? The Case of Alibaba

Abstract

The IPO of Alibaba was the biggest IPO on record. However, outside shareholders who invest in Alibaba will have little say in how the company is actually run. The firm has put in place a number of mechanisms that make it deviate from the principles of good corporate governance. This paper uses the Alibaba IPO as a case study to expose the corporate governance features of founder-led high-tech firms. Many of these types of firms seem to choose governance structures that entrench incumbent executives and limit shareholders' power. I discuss in detail Alibaba's most striking governance weaknesses, draw comparisons to other U.S. firms with similar governance structures, and put it in the context of the wider academic literature concerning this topic.

Keywords: Alibaba, Founder, Corporate governance, IPO

JEL Classification: G3, G30, G34