The Governance of Dual-Class Stocks: The Case of Alibaba

This paper explores the situation surrounding Alibaba Group Holding Limited applying to list on the Hong Kong Exchanges and Clearing (HKEx) before eventually listing on the New York Stock Exchange. While the company did attract the attention of the HKEx, the company’s unique governance structure of giving full control to company insiders despite an asymmetric balance to equity caused Hong Kong’s Securities & Futures Commission (SFC) to balk on the situation. With the company unwilling to adjust its governance structure and the SFC rejecting an exemption to its “one-share-one-vote” policy, Alibaba rescinded its application and listed on the NYSE, one of the major suitors of the company. This left Hong Kong in a dilemma as it proposed to drop its ban on dual-class stocks. In the end, the former British colony, to praise of governance experts, decided to maintain its protection of the investor and keep its “one-share-one-vote” policy.