Party of Five

Don’t let Alibaba’s 27 partners fool you—the company is controlled by five people

June 26, 2014
Obsession
Alibaba IPO
June 26, 2014

Alibaba recently revealed the members of its all-powerful “Lakeside Partners” management committee, a list that includes seven of the company’s original founders and numerous business heads and other executives. The company’s partners—and not its future shareholders—control nominations for Alibaba’s board of directors, and their dominant role was a core point of contention when Alibaba was considering where to list its forthcoming initial public offering.

But the power of Lakeside Partners actually pales in comparison to an elite Alibaba subgroup called the “partnership committee.” This five-member group, according to the IPO prospectus, is responsible for nominating new partners and administering their election. And it’s almost impossible for partnership committee members to be replaced:

Partnership committee members serve for a term of three years and may serve multiple terms. Elections of committee members are held once every three years. Prior to each election, the partnership committee nominates eight partners. All partners may vote for five nominees and the five nominees who receive the most votes from the partners are elected to the partnership committee.

In other words, only the partnership committee can nominate candidates for the partnership committee. If any of the other 22 Alibaba partners think it is time to introduce fresh blood into the elite group, they’ll need to persuade an existing member to nominate someone, and that member will need to convince the partnership committee. And if investors want a change, they’ll have no direct way to push for one.

The five member committee is made up of co-founder and chairman Jack Ma, vice chairman Joseph Tsai, CEO Jonathan Lu, co-founder and financial services head Lucy Peng, and chief strategy officer Zeng Ming. They hold a small minority ownership stake in the company: Ma currently owns 8.9% and Tsai owns 3.6%, and the others far less. But based on Alibaba’s conditions for changing the group, they will be able to maintain an iron grip on the company for years to come.

Read this next: Quartz coverage of the Alibaba IPO.

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