A funny thing is happening on the way to China’s future economic domination of America and the western world. Contrary to expectations, some of China’s most successful corporations are choosing to plant roots in the West instead of the East.
Alibaba, for instance, represents China’s e-commerce version of the American firm Amazon. It was initially expected to list its first major public offering of stock on the Hong Kong Stock Exchange, the second largest exchange in Asia after the Tokyo Exchange. But last week, news outlets reported that Alibaba will choose to raise up to $15 billion on the New York Stock Exchange or the NASDAQ instead.
Interestingly, Hong Kong appears to have lost Alibaba because of its regulatory insistence on the principle of investor control over boards of directors. Alibaba prefers to have its own managers and founders control its Board, a position that appears to be acceptable to the NYSE.
Investor control over corporate boards, of course, represents a bedrock principle of corporate governance. And yet major Chinese firms appear to be finding more flexible interpretations of this principle in the United States than in China.
Thus, New York may be evolving into “Hong Kong On The Hudson,” a moniker that does not refer solely to the prevalence of initial public offerings by Chinese firms on the NYSE or the NASDAQ. Apparently, it also refers to the willingness of stock exchange officials in the United States to accept management structures that are no longer acceptable in China.
If you were Mary Jo White, Chair of the United States Securities and Exchange Commission, would you permit the NYSE to win Chinese business by interpreting principles of corporate governance in a flexible manner?