With contributions from Wei Sheng

A series of recent changes to JD.com’s management team indicates that tech billionaire Richard Liu may be ready to take a step back from operations at the Chinese e-commerce giant he founded over two decades ago. 

JD is different from Chinese tech majors like Alibaba, which is based on a partnership system: JD doesn’t have an official co-founding team. Liu’s absolute rule has typified the company since its beginning. 

Liu stepped down on Dec. 5 as manager of a Xi’an-based unit that wholly owns JD Logistics, the firm’s delivery arm. Liu holds an indirect 45% stake in the subsidiary, according to corporate data platform Tianyancha. The development is the latest example of Liu withdrawing from the company’s ongoing operations:

  • In May, Liu walked away from his role as the manager of the Jade Palace Hotel in Beijing, an iconic building in the capital that JD acquired for $400 million in February.
  • He resigned as the legal representative for a subsidiary in Suqian of eastern Jiangsu province in July. The unit is a shareholder in JD Digital.
  • In November, Liu stepped down as manager of two cloud computing units that the company registered in February.
  • In the past month, he has given up top roles at four healthcare subsidiaries registered in Beijing, Yinchuan in Ningxia Autonomous Region, as well as Huizhou in Guangdong province. 

The moves echo remarks made at a November 2018 earnings call when Liu announced plans to start handing over some responsibilities to other top executives in order to “focus on new business lines.”

That announcement came amid a very public investigation by local attorneys in Minnesota over his possible prosecution over suspected “criminal sexual misconduct.” The allegations had led to Liu’s one-night arrest in Minneapolis on August 31.

The case, involving a 21-year-old female Chinese student at the University of Minnesota, was ultimately dropped by local prosecutors in late December due to “insufficient evidence.” However, the student, Liu Jingyao, filed a civil lawsuit against him and JD in April, seeking damages in excess of $50,000.

Key-man risk

Shares tumbled by one-third between September and December 2018 as analysts voiced concerns that the incident could harm the company’s access to Chinese government officials. They said the issue highlighted JD’s key-man risk, where an organization’s success depends to a great extent on one individual.

“Mr. Liu’s personal issues affect brand image. It also affects the authority of JD’s management team—you may no longer get invited to government meetings,” Li Chengdong, chief executive of a Beijing-based tech consultancy, told the Financial Times in an interview in November 2018.

Liu was not included in a list of China’s “100 outstanding private sector entrepreneurs” issued by the country’s top union and the ruling Communist Party’s Central Committee in December 2018. Rivals like Alibaba founder Jack Ma and Suning’s Zhang Jindong were included.

Liu, a member of the Chinese People’s Political Consultative Conference (CPPCC), the advisory panel for China’s parliament, was notably absent at the country’s largest political event in March. He resigned from the CPPCC advisory panel in November, citing “personal reasons.”

“As the CEO and face of the company, anything that happens to him would pose a key-man risk, where the company’s operations would go into dire state of affairs where decisions made might not be valid,” Derrick Chin, a Singapore-based analyst at Swiss financial services company UBS, wrote in an investment note published on December 3.

Firmly in control

Despite Liu’s moves away from power, he is still firmly in control of the company. He remains the CEO and chairman of the board of directors at JD.

Liu, with a 15.5% stake in the company, holds 79.5% of JD’s voting rights thanks to the company’s “dual-class” share structure where founders own a special class of shares with more voting rights. The company’s five-member board is inquorate without Liu, according to company statutes.

With his tight grip over the company, Liu’s departure brings more uncertainties after a slow recovery from a troubled start to 2019. On top of that, succession is still up in the air after severe brain-drain. During April, three top executives stepped down, including Chief Technology Officer Zhang Chen. General Counsel Rain Long Yu and Chief Public Affairs Officer Lan Ye.

A JD representative declined to comment when contacted by TechNode on Wednesday.

Breathing new life into the brand

Liu is trying to revive JD’s image again, an analyst who asked not to be identified due to the sensitivity of the topic told TechNode.

Many top-ranking executives have left the company and it has not made any merger and acquisition moves since last June, the analyst added. The company’s share price bounced back to $33.26 on Tuesday on the Nasdaq, a similar level to August 2018 when the sexual assault scandal was initially made public.

The rally is partially due to the strong financial performance of the company with revenues in the first three quarters of the year up 20.9%, 22.9%, and 28.7%, respectively. 

The company posted net earnings of RMB 134.8 billion ($18.9 billion) in the third quarter of this year, an increase of 28.7% year on year, the largest expansion in the last five quarters.

“I think the best way for Liu is to leave JD and remain as [an] honorary advisor,” said the analyst.

“He would still be able to have some impacts [on the company], which would be focused on what he wishes—the company’s vision and strategy.”

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Emma Lee

Emma Lee (Li Xin) was TechNode's e-commerce and new retail reporter until June 2022, when she moved to Sixth Tone to cover technology and consumption. Get in touch with her via lixin@sixthtone.com or Twitter.

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