Boardroom disputes tend to be resolved in one of two ways: spectacular fall-out or seething animosity. Management of Gome, to its credit, has opted for the latter. A formal cessation of hostilities between China’s second-largest electronics retailer by outlets and Huang Guangyu, its jailed founder, was enough to send Gome’s shares up almost a fifth on Thursday, making up all the ground lost to the Hang Seng this year. The basic contractual relationship between the listed and unlisted parts of the Gome group, which Mr Huang had threatened to tear up, stays intact. The listed entity, which runs 740 of its own stores, will continue to procure for, and manage, the remaining 370.
But this is a memorandum of understanding, expressing a general convergence of wills, rather than any legally enforceable agreement. There is still plenty of scope for rows over strategy, and for resentments to fester. Mr Huang’s associates will take two seats, one of them non-executive, on an expanded board of 13. That seems fair representation for the company’s largest shareholder, with 31 per cent. But Bain Capital, the second largest with 10 per cent, is still there with three non-executive seats, pushing a profitability-led strategy apparently at odds with Mr Huang’s land grab. Chen Xiao – Mr Huang’s nemesis, whom he accused of betrayal in an emotional address to employees just weeks ago – stays on as chairman.
Investors should recognise that this is an uneasy truce. From his behaviour to date, it appears that Mr Huang sees his incarceration as an inconvenience, rather than a fundamental bar to reasserting ownership of the company he created 23 years ago. It may take time to achieve this. But given that the “price butcher” is six months in to a 14-year stretch, time is what he has.