Jack Ma's Mysterious Backers

Who are we kidding, what else matters this morning besides the Alibaba F-1 filing that hit last night? Can the Nasdaq / tech sector absorb another company with a $150 billion-plus valuation? Does anyone have room in their portfolios? In their indices?

The partners who control Alibaba are anonymous and all-powerful

A source close to the company told Quartz after this article was published that the company’s updated IPO filing in about six weeks is expected to name the board of directors and the partners.   
+

A key to sprawling Chinese e-commerce giant Alibaba’s future—and the reason it is listing in New York, and not Hong Kong—is the company’s partnership management structure. Alibaba’s 28 “Lakeside Partners,” named after the residential housing complex where the company was founded, have the exclusive right to nominate most of the board of directors after the company goes public, and are tasked with preserving the company’s culture and managing its business.
+

So who, exactly, are the Lakeside Partners? It is something of a mystery.
+

Alibaba’s prospectus, filed May 6 with the Securities and Exchange Commission doesn’t name the 28 partners, nor does the company’s website. The prospectus says 22 of the partners are from internal management, and the remaining six from affiliates, and adds that partners generally have at least five years tenure, “meaningful” equity in the company and are “evangelists” for its mission.
+

Alibaba’s partners have long been a “state secret,” David Webb, an activist investor in Hong Kong who has been a vocal critic of the company’s governance, told Quartz. Webb likens the Alibaba’s management structure to the opaque machinations of the Communist Party’s top leaders, and calls Lakeside Partners the “Politburo.”
+

While that might seem extreme, there is actually more public information available about China’s Politburo than there is about Alibaba’s partners.
+

Even the members of Alibaba’s compensation, governance and audit committees (which might give a clue to who the partners are) remain unnamed in the prospectus. And many of the names of the company’s vast “executive team,” which might provide another clue, have recently been removed from the website.   
+

The group will probably include some, but not all, of Alibaba’s 18 founders, and new partners will be elected annually, according to the current prospectus. Here are some of the shoe-ins:   
+

    Jack Ma, lead founder, executive chairman. The charismatic former English teacher who created the company in his living room serves now mostly as a corporate cheerleader and figurehead. He owns an 8.9% stake in Alibaba, and is a partner for life, the prospectus says.
    Jonathan Lu, CEO. A former telecommunications executive, Lu joined the company in 2000, and headed the team that started Alipay, the company’s payment platform, in 2004. He was named Alibaba’s CEO in 2011 when Ma stepped down.
    Joseph C. Tsai, vice chairman. The company’s former CFO, Tsai has been the public face of the IPO in New York. Like Ma, Tsai holds a considerable stake (3.6%) of the company, and is a partner for life.
    Shao Xiaofeng, chief risk officer. Shao, also known as “Polo,” is certain to be included in the partner group, the Beijing Youth Daily reported (link in Chinese). Shao is a former criminal investigator, according to a cached profile from Alibaba’s website, who joined the group in 2005 as head of the network security department.

Secretive though it may be, the partnership structure is integral to the company, as Ma explained in an email to employees (link in Chinese) last year:
+

    The reason why the company has reached this far is not the merits of the 18 founders, but the culture they have created, which made this company unique. Most companies, after losing their founding culture, rapidly decline and are transformed into mediocre commercial companies. We believe Alibaba can go further.
    +

After the IPO, there’s not much regular shareholders can do if they disagree with these partners, except sell their stock. Sure, they can vote on whether to approve the partners’ nominations to the board, but if a nominee is not approved, the partnership names an interim board member anyway until the next shareholders meeting. Alibaba’s prospectus also states that Yahoo and Softbank, its two largest investors, “will agree to vote their shares in favor of the Alibaba partnership director nominees.”