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Age appropriate

8 May 2015 By Robyn Mak

Alibaba’s generational shift in leadership is treating investors like kids. The Chinese e-commerce group is about to replace its chief executive of just two years with a younger insider – a plan drawn up before the company’s initial public offering last year, according to a person familiar with the situation. Yet Alibaba has offered no explanation. Founder Jack Ma wants to promote young leaders, but investors deserve adult answers on who is calling the shots and why.

Better-than-expected quarterly earnings distracted from the handover announced on May 7. Chief Operating Officer Daniel Zhang will replace Jonathan Lu just after two years at the helm. No reason was given, but an internal memo from Ma talked of a shift in leadership to those born after the 1970s. Only 3 percent of Alibaba’s management team are born in the 1960s, according to Ma. It’s not entirely plausible as a justification for the move though. Zhang is just two years younger than his predecessor. 

There may be financial rationale. The outgoing Lu is credited with Alibaba’s double digit revenue growth in its home market and overseeing the group’s blockbuster $25 billion initial public offering last September. Zhang, on the other hand, is a seasoned insider charged with leading Alibaba’s international expansion plans and cloud operations. The e-commerce giant is nudging its focus towards other markets and new businesses.

But investors are left to guess what it really means, and where the real decisions are being made. Outgoing Lu, already a board director, will stay on as vice chairman. Yet the board already has one of those, and Ma remains a hands-on executive chairman. For the CEO of a $214 billion company to be sidelined for no obvious reason other than the whim of his superiors is alarming. Youth is nice, but clarity would be better.

 

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