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Rape allegations against the head of one of China's tech giants have spooked investors this week and raised questions of a CEO which had loosed tight control of the company. Since Liu was arrested in Minneapolis last week, the company share price has been hammered, losing 16% of its value.
Liu is released without charge and through his lawyers, he's denied any wrongdoing. But the investigation is ongoing, and investors may still be nervous because of the way Liu currently dominates Reuters Jen Hughes reports from Hong Kong.>> JD has this highly unusual control clause whereby he must be present for the board to be able to make a quorate, a binding decision.
The only exceptions are if he gives permission, or if he's sick. Even if he's in jail he's still in charge of the company. This is really unusual, this is the second largest e-commerce retailer in China. It's got a lot of shareholders around the world>> And suddenly, everyone's had to go through the by-laws, the articles of association, to try and figure out what clauses there are in there.
>> Liu owns about 60% of the company's stock, but weighted voting rules give him around 80% of the company's votes. Plus has been without a Chief Operating Officer since 2016. And it's unclear how the company would be run in Liu goes.>> Tech founders often have outside control of their companies anyway.
Think Mark Zuckerberg, Bill Gates, Steve Jobs, these are iconic figures at the top of their companies. Jack Ma for Alibaba as well. But what the difference is here is we don't really know who Richard Liu's second in command is. He's such a towering figure in that it's hard for investors, or reporters even, to know who would be in charge if something did happen to him.
We don't know if he'll be charged, we don't know what would happen if he is charged, and we don't know if he would leave the company.>> Fund managers told Reuters that Liu's tight control does make for more investor risk. But that little is likely to change in how is run, unless the company hears from a significant number of shareholders.