A move to stop China chain run from jail

Rob Schmitz Sep 28, 2010
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A move to stop China chain run from jail

Rob Schmitz Sep 28, 2010
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STEVE CHIOTAKIS: Here in the U.S., we hear stories of the mafia or a drug cartel being run from inside a jail cell. In China, one of its largest companies is run this way. GOME, China’s largest appliance chain. The company’s founder is serving a 14-year sentence for insider trading and graft, but he’s still calling the shots.

Today, GOME shareholders are meeting to change that, as Marketplace China bureau chief Rob Schmitz reports.


ROB SCHMITZ: GOME’s shareholder meeting sort of feels like a season finale of a trashy TV crime drama. Company founder Huang Guangyu was once China’s richest man. He’s fighting a posse of shareholders for a controlling stake of GOME. They’re worried that a company run from inside a jail cell isn’t the best way to attract investors.

Economist Andy Xie says the founder of a Chinese company is always considered the boss, oftentimes regardless of his actions.

ANDY XIE: And for better or worse, you have to judge the character of the boss before you decide if you want to invest in the company or not.

JPMorgan Chase and Morgan Stanley have had enough of this boss. The two have been selling off their shares in GOME. On the other hand, Boston-based private equity firm Bain Capital has increased its shares to unseat Huang.

It’s a gamble, says economist Xie. Huang made the company what it is today, and that might just be enough to continue to run this company from behind bars.

In Shanghai, I’m Rob Schmitz for Marketplace.

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