Colin Huang, the 40-year-old billionaire behind e-commerce upstart Pinduoduo, stepped down as the company’s chief executive officer on Wednesday, handing day-to-day operations over to chief technology officer Chen Lei.
Also known as Huang Zheng, the founder will remain chairman of the board, one of two members of an administrative super committee called the Pinduoduo Partnership, and retains a significant majority in company voting rights. Along with Chen’s appointment, the company named a general counsel and vice president of finance.
Pinduoduo’s new captain
Five years ago, Huang founded Pinduoduo, now China’s second-largest e-commerce platform, along with a team formed from his previous startups.
- Chen Lei: The new CEO worked alongside Huang as the CTO of Xinyoudi, a gaming studio Huang launched in 2011. He continued to work with Huang at Ouku.com as an architect engineer in 2007 and was named Pinduoduo’s CTO in 2016.
- Zhu Jianchong: Senior vice president of strategy and legal at Pinduoduo since November 2018, Zhu was appointed the company’s general counsel on Wednesday. Previously, Zhu was a partner at the Beijing office of White & Case LLP, overseeing cross-border public and private mergers and acquisitions after serving various roles at Skadden, Arps, Slate, Meagher & Flom LLP.
- Ma Jing was named the vice president of finance. He began at Pinduoduo in June 2018, coming from Chanel’s China business, where he held finance-related roles for 17 years. Pinduoduo has never had a CFO, rare for a listed tech company of its size, and a fact that has raised eyebrows. Ma’s vice president of finance role is the closest equivalent.
Huang downsizes his share but retains control
The shakeup goes beyond a management reshuffle. A Wednesday regulatory filing showed that Huang reduced his personal holdings in Pinduoduo to 29.4% from 43.3% but retained strong control over the company with 80.7% of voting shares, down from 88.4%.
The change in Huang’s stake followed shortly after wide media coverage of his new ranking as China’s second-richest man, replacing Alibaba’s Jack Ma. Huang, who was worth $45.4 billion as of June 22, was next only to Tencent founder and CEO Pony Ma in net worth.
In an open letter on Thursday, Huang details his share distribution plan for various new initiatives.
- Huang transferred roughly 371 million ordinary shares, or about 7.74% of the company’s total shares, to the Pinduoduo Partnership to support fundamental science research, social responsibility activities, and to further incentivize future management.
- Additionally, Pinduoduo’s founding team donated a total of 113 million Pinduoduo shares, or 2.37% of total shares, to Starry Night Charitable Trust, a charitable foundation dedicated to promoting social responsibility development and scientific research.
Huang’s handover of the CEO role may seem reminiscent of Jack Ma’s departure from Alibaba last year, but both Huang and the company he built are much younger. While Huang has said that he is relinquishing running day-to-day operations to provide “space and opportunities for the team to grow,” he will remain heavily engaged in the company’s strategic planning.
A Reuters column points out that the five-year-old company stuck in “startup governance mode,” against a backdrop of intensifying scrutiny of US-listed Chinese technology companies. The company said that replacing Huang with Chen and appointing two other key management hires addresses governance shortcomings.
“This division of labor will help us steer the company in its next phase of growth and development. As the company evolves, the corporate structure and management structure also have to evolve and keep pace with developments.”
—Chen Lei, Pinduoduo CEO, in a statement sent to TechNode
Lessons learned from rivals
Huang appears to have learned from his business rivals, particularly Alibaba and JD.com, during a critical time for the company. Pinduoduo has been scrutinized by short-sellers, while others have called for a change in strategy.
The concept of Pinduoduo Partnership, which aims to “ensure the sustainability and governance” of the company is similar to that of Alibaba Partnership, a cornerstone for Alibaba’s organization structure. It may also be a way for Huang to retain control of the company he founded.
Huang and Chen are the first and currently only members of the Partnership Committee, which was formed in 2018 and is entitled to appoint executive directors and nominate and recommend the chief executive officer.
Pinduoduo representatives drew distinctions between the body from the Alibaba equivalent. Unlike Jack Ma, Huang can be voted out by other partners and faces mandatory retirement at the age of 60. Huang will be 60 in the year 2040.
“The Partnership is not meant to be a decision-making body,” Huang said in a statement. “It is more of a cultural guardian to ensure that the values of Ben fen [Pinduoduo’s core value that essentially means to adhere firmly to one’s own duties and principles] are carried on.”
Established almost a decade ago, Alibaba Partnership was the foundation for Alibaba’s succession plans and the reason why Ma had the confidence to announce his 12-month draw-down.
From JD.com, however, Huang has learned about key-man risk. The company is one of the rare tech firms in China without an official co-founding team. With Richard Liu’s absolute rule, JD.com suffered greatly during the founder’s rape accusation scandal and the lack of a succession plan. JD.com is gradually recovering as Liu retreats from operations and retail chief Xu Lei takes the lead.
“Building up capable lieutenants, and giving them appropriate shareholding, will be an ongoing consideration,” Michael Norris, research and strategy manager at marketing and sales firm AgencyChina, told TechNode.
Moreover, Pinduoduo needs a more rational “shared brain,” consisting of diversified and professional talents to improve the operating efficiency and governance level of the platform, e-commerce analyst Lu Zhenwang told local media.
Update: The story has been updated with comment from Pinduoduo on differences between Pinduoduo’s and Alibaba’s Partnerships.