Jailed Huang under spotlight in struggle for appliance giant

Updated: 2010-09-19 11:36
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BEIJING - The struggle to control Gome Electrical Appliances Holdings Ltd, China's biggest home appliance retailer, between its jailed founder and executives has stirred heated discussion among Internet users and experts.

A survey at, one of China's most popular portals, attracted over one million Internet users.

More than 879,000 Internet users, or 77.24 percent of the total voters, supported Huang Guangyu, once China's richest man who is now serving a 14-year jail term for bribery and insider trading, in his battle over Chen Xiao, Gome's chairman of board of directors, who is backed by Gome executives and the US company, Bain Capital.

Many Internet users expressed concerns that Gome, a top brand in China, might be merged by Bain and accused Chen of betraying Huang, who created Gome from scratch and appointed Chen as CEO, in forums on most major Chinese portals.

"Mr Chen is shortsighted with money and personal gains, forgetting all his responsibility to the company and society," Internet user GOGO21 posted.

"Whatever the final result, Chen has already lost the support of the people. A consumer product company cannot succeed without the favor of the people," posted Gaotanyan01.

Differing from Internet users' overwhelming support of Huang, experts take a more neutral role. Many of them view the power struggle as an unprecedented case in China's business history.

"This struggle showed to Chinese companies that internal disputes could be solved in a framework of law and company regulations. I hope it will set up a new standard and promote the progress of Chinese companies in corporate compliance," said Wang Zhile, a researcher with the Chinese Academy of International Trade and Economic Cooperation, Ministry of Commerce.

The Chinese companies are undergoing a new round of transformation in taking corporate compliance responsibility, Wang said during a forum with other experts discussing the implications of the case on Sept 17 in Beijing.

"In the past decade, Chinese companies have been driven by growth and profits in their rapid development. Now they have to become more aware of their responsibility in complying to the rules," noted Wang.

At the special general meeting on Sept 28, shareholders will discuss and decide whether to support Huang's proposals of removing Chen from his positions and revoking a general mandate that permits the company's directors to issue Gome shares.

Analysts say if the mandate takes effect, Chen and the Board of Directors he leads are set to increase the available shares of Gome to dilute the shares under Huang's control to less than one-third of the company's total.

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Currently, Huang and his wife, who has been reprieved from a three-year jail term, hold 32.47 percent of Gome's shares. The couple has the right to at least veto important resolutions that need to be agreed upon by shareholders representing over two-thirds of the voting rights.

Other experts at the forum focused on the brand. Zhu Heliang, head of Chinese Brand Research Center (CBRC), Capital University of Economics and Business, said he understood the feelings of Internet users, "Brand is different from products, it has customers' emotions."

"Resorting to the emotions of consumers on the brand can be misleading. But it will not affect the nature of the struggle and cause substantial differences in its results," said Yang Xilun, deputy head of the CBRC.

"Chinese and foreign companies are equal. Being a national brand or not, Gome should not be treated differently," Wang said.

Experts say they hope Huang and Chen can find a solution without hurting the company, its employees, customers and shareholders. "Ideally, we hope the problem can be solved with wisdom in the framework of law and regulations," Yang said.