It’s peg-on-the-nose time for investors in Gome, China’s second biggest electronics retailer. Next week, at a special general meeting, they’ll vote on two sets of resolutions proposed by associates of Huang Guangyu, the former Gome chairman now serving a 14-year stretch in an undisclosed jail. The saga has grown very complicated, but holders with a long-term interest should side with the board and against Mr Huang.
His first demand – a reshuffle of the board – is an obvious non-starter. Whatever shareholders may think of the current management team, there is no wisdom in ejecting the chairman and vice-president in favour of Mr Huang’s sister and his lawyer.
The ex-chairman’s second demand appears much more reasonable: reject the general mandate, which allows the board to place up to 20 per cent of issued share capital at a big discount, bypassing existing shareholders. Records suggest that more than half of investors unaffiliated with Mr Huang voted against the general mandate just four months ago, at Gome’s annual meeting. In general, that is as it should be. Hong Kong’s GM regime, much looser than equivalent regimes elsewhere, is a governance eyesore.