A Synopsis of the Alipay Case                     过     满             暧           ,        还            ,            给    ...
“variable interest entity” (VIE) relationship.    2010      6 21 ,                    5                                   ...
According to Jack Ma, Softbank’s Sun Zhengyi wanted to take the second route.“You’re a capable guy, Jack. I’ve had VIEs wi...
holding, and a chairman of the board could be added. If this agreement had come tofruition, Ali Group’s board would be fac...
insider to CEM.      这        ,    软       资                                       2000 10 ,孙                资给        时  ...
are many subtle, complex factors, one of which is the fact that Softbank, which had somany differences of opinion with Ma ...
这                          创                     议         ,   给                 “证词”    The testimony of Alibaba’s founde...
CME: You must have had some sort of special, private communication with the BoC?        :    们MY: We’re often in touch.   ...
“I only have two minutes, I have to go,” and he didn’t give an opinion. The documentsneeded to be given to the BoC the nex...
,                       脏            ,让                 谁            请      ,         烦    转让70%             协议        ,  ...
MY: Yang sat on the fence; this time it was Sun who jumped first. Whether or not thesecond option could be taken, was our ...
MY: The key is, he thought “Ma, you’re really capable, you’re cheating me - the centralgovernment isn’t like that, so many...
CEM: What type of blame did you expect?             :                   :       软               们                 ,       ...
过          ,       为领导                                        ,                ,这       为CEO          职责      ,           ...
为                    给  试      100                ,           证           (   :     证           协议    ),         现为       ...
will be influenced by false criticism.                       :              ,           单            终   协议              还...
MY: Yes we have, and in a few days I’ll be going to Japan to support him. (Note: AtSoftbank’s shareholders summit on June ...
30%, and now he has more than that. He hasn’t diluted himself at all. Look at whether ornot he gives anything to the worke...
just that we’re different. It’s normal that we have lots of differences, arguing doesn’t affectour friendship.            ...
讲                                  讲,                      这   ,           这       ,办             说               ,       ...
软    贵   ,            进           贵                   满   这   ,哟,     杂      评论             图                             ...
:           ,             购             过   ?MY: Many. Anyone who ever wanted to buy Yahoo came to me.                    ...
and those who want to chat, have a chat. I speak directly, people think I’m very sensitive,but in reality I’m very rationa...
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Jack Ma interview, July 2011

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Alibaba founder and CEO, Jack Ma, gives an exclusive interview to China Entrepreneur Magazine about the whole Alipay / VIE / Yahoo controversy.

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Jack Ma interview, July 2011

  1. 1. A Synopsis of the Alipay Case 过 满 暧 , 还 , 给 计 员带 时 As the entire license distribution process has been full of uncertainty, rumour andplot, licensing in the third-party payments industry has brought a set of constantlychanging risks and opportunities to the Ali board of directors, each of whom had theirown ideas. / 记 简单 说, 线 盘 悬 , 线 势 对 资态 这 队诉 转 ……这 这 线 拧The Alipay saga can essentially be broken down into two threads. One is the suspenseof the licensing legislation that has been hovering over China’s third-party paymentsindustry for the last five years, and the other is the struggle between the members ofAlibaba’s 4-man board of directors. On the periphery of these two threads, pinching andpulling at them, are elements including the development of the payment industryenvironment, fluctuations in China’s feeling towards foreign investment, the ups anddowns of the relationship between Alibaba and Yahoo over the past few years, and shiftsin the demands of Alibaba’s management team. 终 结 : 队 为 夺 颁 ,单 脐带 The result? In order to get a third-party payments license from the Bank of China(BoC), Alibaba’s management team unilaterally cut off Alipay’s umbilical cord to its parentcompany, the Alibaba Group. 线 对 资 ( 软 39%29.3% ) 虑,2009 7 24 , 纪 层 过 结 调 获 6 1 , 岛 资alipay 70% 转让给 谢 资 (简 ),alipay “协议 ”( VIE)Let’s look at the first thread. Due to its sensitivity towards its own identity as a foreign-invested company (foreign enterprises Yahoo and Softbank own 39% and 29.3% sharesin Ali Group respectively), on July 24 2009 Alibaba’s board of directors, through theminutes of a meeting, authorised their management level to legally obtain a paymentslicense through a re-arrangement of their stock rights structure. On the 1st of theprevious month, Alibaba’s wholly-owned Cayman Islands-registered subsidiary Alipaytransferred 70% of shares to Jack Ma and Xie Shihuang’s Zhejiang Alibaba E-CommerceLimited (shortened to Zhejiang Alibaba), and Alipay and Zhejiang Alibaba maintained a
  2. 2. “variable interest entity” (VIE) relationship. 2010 6 21 , 5 办 ( “2 ”) 规 : 资 ,须报 ;2011 9 1 , 许办 2010 8 6 ,alipay 30% 转让给 On June 21 2010, after five years of drafting, the BoC released its “Measures forManaging Non-Financial Organization Payment Services” (also known as “Order 2”) inwhich it was ruled that if a company had foreign investment, it must receive officialpermission from the State Council. On September 1, any company without a paymentslicense would no longer be permitted to carry out payment services.On August 6, Alipay transferred the remaining 30% of Alipay shares to Zhejiang Alibaba.对 这 转让,孙 杨 远“ ”( 说) 毕 , 协议 证 资 ,2011 1 26 , 传 协议 , 态 转 终 该 , 过 记 访, 负责 证 们 过该 ,According to Jack Ma, board members Sun Zhengyi and Yang Zhiyuan “both agreed”with these two transfers. At the end of the day, common practice in the industry is that aVIE can guarantee the rights and benefits of foreign shareholders. But on January 262011 when the BoC sent a fax requiring Alipay to declare whether or not it had a VIE, thesituation changed. Alibaba has never shown China Entrepreneur Magazine thecorrespondence, but according to interviews carried out by this magazine, others in thepayments industry confirmed that they had received similar correspondence, and thatsuch an event had happened. , 这 传 , , 们 : 审 顺 , 协议 ,Alibaba maintains that according to the fax and subsequent verbal communication, itbecame clear that if it was to avoid examination by the State Council and receive one ofthe first payments licenses, they would need to terminate their VIE, and stamp an officialdeclaration. ,摆 : 维 协议 ,报 ;维 协议 , 协议 ; 终 协议 , 谈 偿办Three paths lay ahead of the board of directors. One, maintain the VIE, and be subject tothe State Council’s approval; two, maintain the VIE, but state that there was no suchagreement; three, terminate the VIE, and discuss compensation with its shareholders. 说,软 孙 “ 办 , 资 (协议 ), ?”
  3. 3. According to Jack Ma, Softbank’s Sun Zhengyi wanted to take the second route.“You’re a capable guy, Jack. I’ve had VIEs with all the companies in China that I’veinvested in, why can’t I have one with you?” 杨 远“ ” 对 记 ,“ 对( 终 协议 议) , 觉 ( ) 责 ; , ( ) , 态 ”Yang Zhiyuan was sitting on the fence. Ma picks up the pen and cigarette on the desk,and gestures at me: “If he opposed [Ma’s proposal to terminate the VIE], he thought hewould be responsible if the company [couldn’t get a license and] failed; if he agreed, hewould go back to Yahoo empty handed, so he may as well stay quiet.” “ 们讲 , 这 , 们, 办 ” 坚 议 , : 协议 , 续 偿“I told them very clearly: ‘Guys, this is how it is. We’re out of luck.’” Ma insisted on takingthe third path. After fruitless negotiations, Ma made a decision based on his own wishes:to get rid of the VIE, and to inform the other two shareholders that they would be enteringinto compensation talks. :杨 远 孙 (CFO) 话说,“ 论 讲,这 组 , , 为 ”The Alibaba board of directors is made up of four people: Yang Zhiyuan, Sun Zhengyi,Jack Ma and Cai Chongxin (Alibaba’s CFO). To quote Professor Ning Xiangdong ofTsinghua University’s research company, “In theory, to have a four-man board ofdirectors is a very strange setup, because it can very easily come to a deadlock.” 这 “ ” 2005 8 , 10 资产换购 40% 时 约 , 35% , 队 31.7% , 5%,“还 约 ” 泽 资 鹰说 , 队 进 时 ,2010 10 , , 该约 ,临 This “deadlock” began in August 2005, when Yahoo exchanged one billion US dollarsand Yahoo China’s assets for 40% of shares in Alibaba Group. The agreement at thetime was that Yahoo would only have a 35% voting right, and although Jack Ma’smanagement team held a 31.7% share, they had an extra 5% voting right.“Also, there was a stipulation that Ma could not be fired whenever they felt like it,” saidZhongze Jiameng Investments Limited chairman Wu Ying. So, Jack Ma and CaiChongxin joined Ali Group’s board of directors. However, it was set down that afterOctober 2010, Yahoo’s voting rights would increase to be in proportion with their share
  4. 4. holding, and a chairman of the board could be added. If this agreement had come tofruition, Ali Group’s board would be facing a new balance of power. 访 , 认 这 “难 ” 这“难 ” 论 话语 , 现 CEO (2009 )对 态 ,还 孙 员 问题 畅(详 访谈 录 )In the interview, Ma didn’t deny that over the past two years, his relationship with theshareholders had seen “difficulties”. These “difficulties” included the theoretical increasein Yahoo’s voting rights on the board of directors, as well as a lack of understanding ofand stiff attitude towards China on the part Yahoo’s CEO Carol Bartz (who took over in2009), and Sun Zhengyi’s poor communication on worker incentives (see the followingarticle). 说孙 孙 韩 , 1980 创 软 , 资 VC, , 产 态,软 30时 为 说:“ , 们 约800 , 30 这 5000 , ”First, Sun Zhengyi. Sun, a Korean of Japanese descent, established Softbank in 1980.While it may seem like an investment-happy VC, it’s actually a bold technology companywith an industrialist heart. Sun recently stated his hope that within 30 years, Softbankcould become one of the top ten market-valued tech companies in the world: “Right now,we have about 800 tech companies worldwide, and I hope that within 30 years we cantake this up to five thousand, with the majority of those in Asia.” ,软 欢 , 时还 营 营 宽带 络 ,软 阔 ,2000 资 ,软 对 进 战 资, SNS 频 颇 领In Japan, Softbank has a very popular web portal, search engine and e-commercewebsite, as well as Japan’s fastest growing mobile operator and its largest broadbandnetwork. However, the company’s biggest explorations have actually happened in China.Since its investment in Alibaba in 2000, Softbank has carried out strategic investment inmany well-known Chinese internet businesses, covering e-commerce, social networkingsites, video, mobile internet and several other promising areas.“传 资 钱, 软 孙 钱 这 孙 资时 阔绰, 竞 , 钱, , 报, 战 ” 创 对 说“Traditional investors use other people’s money, but Softbank uses Sun Zhengyi’s own.This makes him very bold in his investments, and very competitive on price. But onceyou’ve got his money, if you want out, it’s not that easy. What he cares about isn’t one-time payoffs, but his overall strategic arrangement,” said an anonymous Chinese industry
  5. 5. insider to CEM. 这 , 软 资 2000 10 ,孙 资给 时 传 2000 ,2004 2 6000 , 现钱, 29.3% This is obviously one small item on the grand scale of Softbank’s investment inAlibaba. In October 2000, Sun invested 20 million US dollars in the then-unknown Alibaba,and another 60 million dollars in February 2004. To this day, Sun has never pulled outone cent, holding 29.3% of shares in Alibaba today. 饰 对孙 资 钦 , 贯“ 员 ” 逻辑 为孙 陈 孙 层 对 “ 负责 讲, 队 30% 孙 产 营 ,这 议 资 ”孙 队 问题 责孙 “ 鸡 ”Ma doesn’t hide his great respect for Sun’s investment, but he certainly did not plan tohave his unwavering “Customer first, worker second, shareholders third” logic derailedby Sun Zhengyi. He lays out flat that he and Sun had a difference of opinion at boardlevel. “I can reliably say that if Ali Group had listened to more than 30% of Sun’s adviceon business and operation, this company would have died a long time ago. A lot of hisadvice was stupid. Investors can’t be entrepreneurs.” Sun and Ma’s core conflict was onhow to encourage the team. Ma has called Sun “the world’s biggest cheapskate”. ,对 , 资产 , , 购 绝, 35 购15% 360 鸿祎( CEO) :“ 过 ”, 购 , 购 , 说, 这 ,“ 购 , 过 ?” 显 顾 , 访谈 这归 “ ”, 诸 杂 , : 软 ,As for Yahoo, it’s common knowledge that China’s Alibaba has become one of the sinkingcompany’s most important assets, at one time propping up Yahoo’s share price. In thissituation, Ma’s numerous propositions to buy back shares were all rejected. Forbes oncerevealed that when Ma attempt to buy back 15% of shares in Yahoo with 3,500,000,000US dollars, he met withrefusal. Outsider Zhou Hongyi, Yahoo’s former China CEO andchairman of the board at China’s biggest provider of free anti-virus software 360 Qihoosaid: “The shares Yahoo has in Alibaba are perhaps worth more than all of its ownshares.” Buying back shares wasn’t as worthwhile as directly buying shares in Yahoo,and becoming a large shareholder.According to Ma, it wasn’t that he hadn’t had the chance: “Any company that wanted tobuy Yahoo had all approached me at one time or another.” But he let the opportunity passby. In the interview, Ma puts this down to “kindness”, but this may not be the case. There
  6. 6. are many subtle, complex factors, one of which is the fact that Softbank, which had somany differences of opinion with Ma on the subject of Alibaba, is a large shareholder in Aliand Yahoo. 论 , 3 时, 访时说,“ ( 结 ), 对 ?”Whichever way you look at it, in March of this year MY in an interview with CEM, Ma said“If I could change [the shareholding structure], I’d be an idiot not to, right?” 观 , 纯 资 “ ”,Objectively, Alipay obtaining a license purely on its own money is a golden opportunity tochange that structure. 对 认 为 “ 脏”, ,现 “ 脏” ,让 “ ”,这 ! 该 为对 队显 , 贵 资产, 队 软码Naturally, Ma won’t admit to this. He likens Alipay to Taobao’s “liver”, saying that to pull itout in order to get a license and make it into an independent “person” is a very risky thingto do! But the obvious benefit of this action to Ma’s team is that in taking hold a preciouspart of Ali’s assets, Ma’s team has bulked up its bargaining chips in the next round ofnegotiation with Yahoo and Softbank. : 槛? 们 ? 过 —— , 满 暧 , 还 , 给 员带 时 , 预 ,夺 戏 时The license. Is it Alipay’s stumbling block? Or perhaps an opportunity for Ma and histeam? Because the entire licensing process and communication between Alipay and theBoC has been full of uncertainty, rumours and plotting, payment licensing has broughtmany different, constantly changing risks and opportunities to the Ali board of directors.In a situation where it’s impossible to know clearly in advance about licensing policy,every player in the game has to be flexible. , 规 , “ ”In the cracks between regulations and real-life operation, Ma made an “imperfect, but theonly correct” decision. Part 2 专访 录 CEM’s Interview with Jack Ma
  7. 7. 这 创 议 , 给 “证词” The testimony of Alibaba’s founder on the debate over Alipay, left for posterity 访/ 记 谈 Talking about : 刚 记 , 软 协 码 2009 ( 转让 ) , 态 转 吗? CEM: According to what you just said at the press conference, your dealings withSoftbank and Yahoo began in 2009 [the first transfer of shares]. Did the turning pointcome in the first quarter of this year? : , 预测 标 们 额, 标 , ( )这 过 这 须 讲 : 们 , , 们 绕过 ( ) , 说: 说 ,MY: Actually, from the first day I started Alipay, I predicted that the government would[eventually] control it. I don’t mean to boast about our proportions, or about the country’ssecurity, but the [payment] industry is something that no government in the world wouldlet pass by. I have to let the shareholders know these things clearly: if we were a tinycompany right now, it wouldn’t matter, but we’re a big one, so we can’t dodge thesethings. But [the shareholders] don’t believe me, or they say “we’ll talk about it anothertime”. If they don’t agree with something, you’re stuck. : 让 场 额 50% 这 吗?CEM: Could the BoC allow a company like yours, one that has 50% of the market, tomiss out on getting one of the first licenses? : 说这 艰难 5 时 , 说 ? 过 虑 , 说 则, 结 这,这 , “ ”, 给挤 ,MY: That’s why this matter is so tough. The BoC have taken 5 years to go from talkingabout licenses to actually giving them out. They said they’d distribute them last year, butthey didn’t. What are they doing? The BoC has been through a lot of tough thinking, and Ican understand their inability to stand up and talk about it. The government has itsreasons, and the BoC is wise, too. But the result is that I’m standing here with the BoC onone side, and these two bastards on the other side, and they’ve squeezed me out andmade me out to be the bad guy. : 应该 过
  8. 8. CME: You must have had some sort of special, private communication with the BoC? : 们MY: We’re often in touch. : 资问题 ,应该为 ?CME: On the question of foreign investment, should they make special allowances forAlipay? : 为50%,MY: Precisely because it’s 50%, it’s impossible. “单 ” 产 Where did the decision to “fly solo” come from? : 们 终 协议 , 该 过 这 ?CEM: You cut off the VIE in the first quarter of this year. According to process, shouldn’tthat have been approved by the Alibaba board of directors? : 们 这 6 , 讨论, 协议 们 这 , 协议 过 协议对, 议纪MY: We established the board of directors 6 years ago, and since then, not one decisionhas been approved by the board. A lot of things have been discussed outside of theboard, and the board have come to an agreement. It’s always been this way; there’snever been any mess of approval or opposition on the board. It’s all decided in theminutes of our meetings.这 说, 给 时 ( 过),为 ?这 脑 孙 ( ) 软 ( ), ( ) ( ), 谁 为这 负责 , 孙 资, , , 对 , 对们 对 说 这 , 说: , , 态 这 时 证 , 进 ……I’ll tell you, this matter wouldn’t have even been approved with ten times the time. Why? Ithas to do with the ass-brains of these two. Sun wants to benefit Softbank, and Yahoowants to benefit Yahoo, and they doesn’t care who’s going to take responsibility for thiscompany. Sun has countless investments. If Alibaba were to die, sure, he’d be sore, butto him it’s one of many. To us, it’s everything. Yahoo is a similar situation. So, if it has todo with their short-term gains, everyone will oppose. When we talked about this, he said
  9. 9. “I only have two minutes, I have to go,” and he didn’t give an opinion. The documentsneeded to be given to the BoC the next day, and if they weren’t, everything would havebeen automatically shut down... :这 为 ?CEM: So it’s an inactive board of directors? : 时 为, 资产 , 脑 杨 远 错,孙错, 们 , 为难 , 资 ? 们 态,这 这 谁违 约 ? 孙 杨 远违 约 ! 为 , 为这 责 说, 营过 , , ,临 这 办MY: Usually it’s active, but in terms of decisions on the handling of assets, it decides withits ass. Yang Zhiyuan isn’t wrong, Sun Zhengyi isn’t wrong, they represent theshareholders. If I was a big shareholder, I’d find it tough too; what are you supposed tosay to your investors? So they simply abstained, and the whole thing ground to a halt. So,who violated the spirit of the contract? It was Sun and Yand! As a director of thecompany, you have to take responsibility for the company. So, as people who have runbusinesses all know, there is no perfect system, and there are no perfect people;systems have to be made according to people. The situation in front of me is one thatsystems are unable to make perfect. : 为 规则, 为 “ ”, 换 “领导 ”, 责 转 资产,这 岂 ……?CEM: But why should everyone believe in the rules? Not everyone is a Jack Ma. If itwere some unscrupulous “leader” shifting a company’s assets around in the name of“taking responsibility”, how wouldn’t this company...? : 说 , 们 则 话, 为 们 还 这 讨论 态问题? 这 , , 5% 场MY: I’m not saying my behaviour was good, but if we weren’t going along transparent,legal principles, do you think we would be able to sit here talking about shareholders’opinions? Alipay would be long dead, or it would have less than 5% of the market. : 觉 时 ?CEM: When do you think you will be able to enjoy some immunity? : , 领导 规则 , 误 ,认为 挣钱 ,认为 现这 为 , 为 诞 , 终 协议
  10. 10. , 脏 ,让 谁 请 , 烦 转让70% 协议 , 时 , 办 们 终 , 给 谁 认这 , 这 说 对 , 觉 认为 对 评 , 给 , 违 约 ,请问 ? , , , , , , 说 , 转 , 进 谈 , ; , , ; , 协议, 责 请问 选择 ?MY: It’s not a case of immunity, it’s just an anomaly. Anomalies test your leadershipcapability. I can do it whilst completely following the rules. Plus, everyone’s made a hugemisunderstanding, thinking that Alipay is making money today, and that I’m doing this forprofit. Actually, Alipay was born to perform a new function on Taobao. Today, terminatingAlipay’s VIE, it’s like taking someone’s liver out, and making it into an independent person.Who would want to take it out? It’s so much hassle. When we first transferred 70% ofshares, it was a VIE, then when the VIE was cut off, there was nothing anyone can doabout it. We had no choice.The most important thing about today is that I can finally be myself, instead of pretendingI’m something I’m not. I admit that this decision isn’t the most perfect one, but it’s the onlyanswer. I’m not saying I’m correct, I’m just saying I think I’ve done what I believe to beright. You can criticize me, but don’t try to jazz it up, like I’m violating the spirit of theagreement. If you more or less understand the truth, I’d like to know how you think Icould’ve done otherwise. Three options: one, close the company; two, lie; three, followthe law—first transfer Alipay out, then negotiate. The first option would have been certaindeath, there’s no way I could have chosen it. The second is a big risk; the BoC couldleave you alone one day, then tie you up within an inch of your life the next. If you don’thave a board agreement, you have to take even more responsibility. Tell me, which onewould you choose? : 这 , 说 们让 们 转 ?CEM: Aside from these three options, couldn’t you convince them to agree to transfer thecompany out? :说 为孙 说 这 , ?MY: They wouldn’t be convinced. Sun really wanted to take the second route. He saidthat everyone takes this route, so why wasn’t I taking it? :杨 远 ?CEM: Did Yang Zhiyuan also want to take the second option? :杨 远 ,这 时 孙 , 们 键
  11. 11. MY: Yang sat on the fence; this time it was Sun who jumped first. Whether or not thesecond option could be taken, was our biggest key difference. : 孙 , 觉 ,CEM: Many people, maybe even including SZY, thought that with your capability, Alipaycould control the risk from policy. :记 , 讲过, 欢 , , , ( )这 , 讲 讲 则 这 线, 5 , 还 违 ?MY: Remember, I’ve said before, I don’t like politics, I don’t play at it; I’m not on the left orthe right. If I liked it, then I wouldn’t be doing business today. If you want to do businessyou have to follow the law, and have principles. That’s my bottom line, I’m almost 50, am Isupposed to go and do something illegal? : 协议 , 时 们 层 ?CEM: About stopping the VIE, how was it discussed amongst the few of you? : 们 , 为 对 : 们 过 “终 ” 缓 ?MY: Just about all of the upper management of Alibaba were there. There were nodiffering opinions, because everyone knows China well.CEM: Did you think about using a more moderate policy than “the cutoff plan”? : 选择, 选择: 资, 资 态 MY: There were only two options, no others: you have foreign investment, or youdon’t. But the shareholders abstained. : 们 ? ,孙 损 , ?CEM: The way you’re describing them is very illogical though, right? If Alipay couldn’t geta license, Sun would be the biggest loser, would he sit by and watch Alipay fail to get alicense? : 键 , 觉 “ 办 , 骗 , 这 , , ?”
  12. 12. MY: The key is, he thought “Ma, you’re really capable, you’re cheating me - the centralgovernment isn’t like that, so many of my Chinese businesses do it this way, why can’tyou?” : 说 转让这 , 说 话吗?CEM: Yahoo announced that they didn’t know about the transfer of shares, are theylying? : 说 ? 纪 说,“这 责 , ”, 给 谈 压 码 为 转让 , 现 讲话: 为 , 为 杨 远还 , 给 尴 , 这 , 还 给 严MY: What do you think? Every time we have a board meeting there are minutes taken.Them saying that is so they can say to their shareholders: “This is Ma’s responsibility,don’t blame me.” In reality, it’s giving me more pressure and bargaining chips innegotiations. Why Yahoo only revealed the Alipay transfer in May, I don’t know that either.Now, I can only speak like a politician: I don’t know why, nor do I want to. Yang Zhiyuan isstill my friend, and I don’t want to embarrass my friends. I don’t want this thing to becomea low-brow argument—I still have to give them my respect. : 终 协议 时, 虑 责吗?CEM: When you cut off the VIE, did you consider the responsibilities and risks you wouldneed to take on? : 虑 3 4 , 这 归 这 时 , 为CEO 责 让 ,还 让 , ( )讨论 —— 时 这过 责?MY: Of course. I thought about it for 3 or 4 months, and I knew that this day would haveto come sometime. When this thing really arrived, I had to take responsibility for itbecause I’m the CEO. Do you let the company fail, or keep it alive, then talk [to theshareholders] about their interests—whilst being blamed by others in the process? : 责CEM: You knew you might be blamed by others? : , 这 责 约 , 这MY: Of course, but I didn’t expect that this thing would point out morality, or violation ofthe spirit of the agreement. I didn’t expect it to be taken in this direction. : 责 ?
  13. 13. CEM: What type of blame did you expect? : : 软 们 , 获 计 这 说: 们 应该 办 绕过 现 应该绕 觉 , 谓 约 ( ), 违 , 现 , 规 , 办 这 谓 时 , 贴 诚 讲 约 标签 诚 , 对 问“资” 时 ,说 资 MY: My original analysis was that Yahoo and Softbank would point out that theirinterests were [being treated unfairly], and would try to retain them. I guess that’s what Iwas expecting. I didn’t expect that the domestic media would rise up and say we shouldhave thought of ways to get around the law. Right now, everyone is telling me tocircumvent the law. I believe that if I acted by the ‘agreed-upon spirit’ that they weretalking about, I would have been breaking the law. So, my problem now is the situationwith the board of directors, add to that the BoC’s regulations, I can’t make a perfectstrategy. But what saddens me the most is that after making such a so-called toughdecision, I’ve been labelled as dishonest, and that I have no respect for agreements. Icould have been totally dishonest; when the BoC asked “Do you have foreigninvestment?”, I could have said “No.” 谈协议 About the VIE : 协议 这 ,CEM: But having a VIE is not illegal in China. : 这 : , 问这 问题: 协议 还 协议 , 协议 这 报 , 协议 证 这 协议 问题, 问题,这 ?MY: It’s like this, those two letters from the BoC in the first quarter of this year asked thequestion very clearly: do you have a VIE or not? If you do, then you don’t need to reportto the State Council today, but if you don’t, you need to make a declaration and guaranteeit. So there’s no question of whether or not a VIE is legal or not, it’s whether or not you’regoing to declare it. How would you deal with that? : 刚 说 这 虑 协议 ?CEM: But you just said that in the three or four months before this letter came, you hadbeen considering terminating the agreement control. : , 们 认为这 严 , 协议
  14. 14. 过 , 为领导 , ,这 为CEO 职责 , 须 虑MY: Before these two letters arrived, we thought this matter wasn’t such a big deal, andwe were proceeding based on the VIE. But when you’re dealing with the BoC, as a leaderyou have to decide how you’re going to change your tactics in case there’s a change inpolicy. This is my responsibility as CEO; there are certain things that you have toconsider. : 预 ?CEM: Were you always warning the board? : , 们 , 责 现 这 讲 , 则 ?杨 远 孙 这 还 ,还MY: Of course. They are one-hundred percent aware of that. But until today, everyonehas been avoiding responsibility. Now, I’ve been forced to tell the truth, otherwise whatdoes it have to do with me? Yang Zhiyuan and Sun Zhengyi are still my friends; there’sstill affection there. : 诉 们 们单 终 协议 时, 们 讶吗?CEM: When you told them you were going to unilaterally cut off the control agreement,were they surprised? : 讶 杨 远3 31 这 报 , 应该 汇报给 , 5 报 现 , 们MY: Of course they were. When Yang received the forms, he should have immediatelytold the Yahoo shareholders, but he waited until May to tell them. So now, Yahoo’s USshareholders blame Yahoo, not us. : 终 协议 软 军CEM: Cutting off the agreement control was pitting yourself against Yahoo and Softbank. : 这 , 们 说话, ,现 给 们MY: Before, this fireball was in my hands, and they said nothing. I was falling all over theplace, not knowing what to do, and now I’ve given it to them. :现 为 这 , 闹CEM: And now it’s a big deal. :问题 这 ( ) 举报 ,说 协议 ,这
  15. 15. 为 给 试 100 , 证 ( : 证 协议 ), 现为 85 ,还 骂? 则 认为这 现 ,谁诚 谁 诚 们 说: 错 ,让 们 讨 对 对 对 对 , 讲这 对 对 们 评论 ,毕 订MY: That’s the problem. In the past, there have been people in the industry who havereported me to the authorities, saying Alipay has a VIE. That’s why the BoC sent me thatletter in the first quarter. So I had to confess. I don’t really care if someone else cheats onan exam and gets 100 percent, but I can guarantee that I didn’t cheat [note: declare thatAlipay did not have a VIE], but why am I now getting 85 percent without cheating, andgetting cursed? I’m just acting on my principles. I believe that now this matter has blownup, people can see it clearly, see who’s honest and who’s dishonest. You can’t say:“Following the law is wrong, let’s discuss the rights and wrongs of the law.” That’s adifferent matter, and I don’t want to discuss it. Whether or not the law is correct is for youto discuss; I’m not a lawmaker. 谈 责 Process and Responsibility : 过 错误吗?CEM: Were there any mistakes in the process? : 觉 错误 , 觉 , 这 ,应该 , 习MY: I think there were definitely mistakes, but I think that making a decision in thesituation that I find myself in, will probably provoke the world’s businesspeople to think alittle, and learn from it. : 习?CEM: Learn? :应该 习 这 , , 继续 责 认为 艰难 难 这 , 为 习 , 过 , 轻 伪评论MY: They should learn from it. I believe that out of 10 businesses, 9 wouldn’t dare tomake this decision. One route is to lie, one is to not get a license and die, and the third isto continue to take responsibility. I believe it’s a very tough, extremely hard decision. If aforeign company did this, it would definitely become an example that Chinesebusinesspeople would study. But in China, it’s been dragged out, and some young people
  16. 16. will be influenced by false criticism. : , 单 终 协议 还 规则 ?CEM: But in fact, isn’t it a little suspicious to unilaterally cut off the VIE so quickly? :这 们刚 说 过 还 结 , 规 营 键 时 , ……MY: This is what I was just saying about whether it’s the process or the result that is themost important. Big industry dictates that it’s the process that’s more important; withoutprocess or regulation, industry operates badly. But when a special case comes down tothe key moment, you need to... : 键时 ?CEM: When it comes to the crunch, process isn’t important? : , 键 时 职 , 责 让 责 , 错 ,错 错, 责MY: It’s certainly important. At the key moment, a professional manager wants process,so he doesn’t need to take responsibility. Process takes responsibility out of your hands;you can’t be wrong if you’re following process, and if it’s wrong, it’s the process’s fault,and it has nothing to do with me. But I had to take responsibility. 孙 历 Historical conflict with Sun Zhengyi : 终 协议 这 , 软CEM: You knew that after deciding to terminate the VIE, you’d be completely split fromSoftbank. : 们 闹闹MY: We’re not really that split. We argue it out in the day, then go for a drink in theevening. : 孙 过?CEM: Have you and Sun been in touch recently? : ,过 还 给 ( : 6 25 举 软 连 软 员,孙 “ , , 们 ”)
  17. 17. MY: Yes we have, and in a few days I’ll be going to Japan to support him. (Note: AtSoftbank’s shareholders summit on June 25 in Japan, a landslide vote saw Ma continueto be a member of Softbank’s board of directors, and Sun Zhengyi stated: “Jack Ma and Iare still good friends, and he is an important business partner, so we have greatconfidence in each other. There’s no need to worry.”) : 现 为 ?CEM: Why is he so silent now? : 远 , 谈 战术 , , 现 , , 为 (谈 ) 孙 ,MY: He never shows his cards, his negotiation tactic is never to show his cards, and toforce you. He’ll force you into a corner without showing his cards. He still hasn’t shownhis cards, he’s waiting for Yahoo to do it, because Yahoo’s bargaining position is worsethan his. Sun’s thinking a lot harder than Yahoo, he’s a lot more crafty. :现 软 还 ?CEM: Softbank hasn’t asked for anything yet? :这 谈 时 谈,觉 这 问题 , , 认为员 时 换 给 轻 , 们 , 对 , ,这 错 , ,员 , 员 这 们俩 这 则MY: This guy is incredibly good at negotiation. Sometimes I see him negotiating withothers at the board meetings, and think that this guy is really something. I disagree withhim on some things; he believes that workers can be switched whenever. I believe ingiving opportunities to China’s youth, to share the future with them. First, I don’t believethat Japan is definitely right, second, putting this in China is definitely wrong. In China, Ibelieve in customer first, workers second - if you don’t have workers then you don’t havea company. Our principles on this matter are completely different. :这 时 ?CEM: When did this conflict begin? : 这 ,这 , 为 , , 释 为 30% ,30% 过 , 释, 给 给员MY: It’s always been like this, we’ve argued every day for the past few years, look at thetime that’s passed since Alibaba was founded until today; my share holding has gotsmaller and smaller, I’ve basically been diluting myself out. Up to today, he’s gone from
  18. 18. 30%, and now he has more than that. He hasn’t diluted himself at all. Look at whether ornot he gives anything to the workers. :这 们CEM: This is your biggest conflict. :这 则 说 让给员 , , 们 , 们让损 , 1 7 员 , 们让 , 这 时 还 责 , 脸MY: It’s a matter of principle. I said to him, if you don’t want to give anything to theworkers, that’s no problem, we respect you, we’ll let you do as you wish. If I lose outmyself, that’s fine, Alibaba’s 17000 workers all have shares, all of which came from us.But you can’t go to the extreme; if we’re coming to a situation like the one we have today,where the company will live or die, and you still don’t want to take responsibility, then Ihave to get hostile. : 让过?CEM: He never gave anything away? :问 1%, , , , 谈 , 鸡 谈 , 说 , 给 为 钱 , 码 , 5 50 , , , 谈 , 员 这 觉MY: Asking him for 1% is like trying to pull out a live tiger’s tooth. Every time we arguedhe was unhappy, like taking shares from him was like you’d skinned him alive. He hastwo world titles, and I respect him for them; the first is that he’s the world’s bestnegotiator, the second is that he’s the world’s biggest cheapskate. He’ll start negotiatingwith you very aggressively, for example if you only want 20 million, he’ll give you 30million. Because he has more money than you, his bargaining chips are bigger thanyours, pulling out 50 thousand for him is like you pulling out 50. Then at the next step,hahaha, you’re under his finger. He has his negotiating skill, but on the subject of workerdevelopment he and I don’t agree. : 们 过?CEM: How many times did you bring it up? : 脸 , 办 简单, , 选择 说对 错, 们 们 , 闹闹MY: He also knew I was going to get hostile, but the reason I couldn’t do anything abouthim was very simple, he’s a shareholder, his choices can’t be called right or wrong, it’s
  19. 19. just that we’re different. It’s normal that we have lots of differences, arguing doesn’t affectour friendship. : 软 谈 偿 则?CEM: What kind of principles are your compensation negotiations with Yahoo andSoftbank based on? : , , , 转 ,让 亏 , 偿 偿 ,为这MY: First, 100 percent legal, 100 percent transparent. The second is that it can’t affectthe development of Alibaba, it can’t transfer benefits onto Alipay, and let Taobao andAlibaba lose out. Third, there must be compensation today and in the future, as this issomething that the whole world needs to know about.b : 偿 额 级 ?CEM: What kind of figure might the compensation come to? : 偿 , 换 话说 觉 观 , 们 们 , 们 们 则,谈MY: The compensation will be large, very large. But to put it another way, I think that inthe end it will definitely be impartial. They have their demands, and we have ourprinciples, and we’ll negotiate it out. :时 ? 时 ?CEM: And in terms of time? When will it be set down? :现 们这 ! 压 ( : 给 记 说“ ”;6 22 , 软 ,谈 “ 质 进 ”, 协议 )MY: The ball’s in their court now! I’m not under pressure. (Note: The previous day, Matold CEM in a text message that “This matter is almost over”, and on June 22, Yahoo,Alibaba and Softbank made a joint announcement, saying that they had “come to asubstantive and heartening development” in the negotiations over the transfer of Alipayshares, and that they hoped to reach an agreement.) : 让 们 ?CEM: Did you let them quote a price? :对, 压 这 评 , 谈,现 这 给 压 现 (给 们) 压 , 话 这 场
  20. 20. 讲 讲, 这 , 这 ,办 说 , 还 ?MY: Yes, my pressure comes from critics and media on this side. Originally, it wasn’t avery big deal, we could have talked about it thoroughly, but now it’s become pressuredfrom this side. Now the pressure on me from the US Government has gone andincreased. There are some things that I can’t say ahere. There are some things that I’llbe able to talk about in 10 years, because in 10 years’ time it won’t be thesegovernments, or this situation, and it’ll be easier to deal with. Am I supposed to run mymouth today, and die tomorrow? : 传 说 ?CEM: Two or three years ago there were rumours saying that some domesticcorporations wanted to buy into Alipay? : , 这 , 让 , 谢 谢 18 创 谢 这 诉 , 资, 这 还 进 转让MY: There were many. Before this matter was eliminated today, I thought it was useless.Zhejiang Alibaba was the recipient of Alipay shares, and the shareholders were myselfand Xie Shihuang. Xie and I are registered shareholders of more than ten companies. Of18 Alibaba founders , some would often use Xie’s name to register. This company’s useis to let the BoC know that Alipay is completely Chinese invested, and that this companycan carry out share transfers. : 们 ?CEM: Do you have any thoughts as to restructuring Alipay’s share rights structure? : ,现 这 还 ,还MY: No, we haven’t even sorted this issue yet, how could we be thinking about that? : ?CEM: In future there must be a state-owned portion of shares? :现 资 进 ?MY: Can’t foreign investors come in? : 资 ?CEM: What about private investors? : , 们欢 资 ,这 讨论 这 这 : 偿
  21. 21. 软 贵 , 进 贵 满 这 ,哟, 杂 评论 图 ,说 说 , 们MY: Of course, we welcome private investors, this is something we’ll talk about in thefuture. Anyway, it’s like this: if we compensating Yahoo and Softbank is expensive, it’ll beexpensive to bring in domestic investors in the future. So today we’ll satisfy this one, andthen in the future there won’t be another. Ayo, it’s complicated. A few [a few quick snapsof the tongue] from critics have nothing to do with you, they say you’re good, they sayyou’re bad, but in the background there’s a lot of tough work.Relationship with Yahoo : 们现 问题 , 现 这 绝, 们 摆 ? 这 , 们 CEM: On the topic of Alipay now, you appear very determined. Is that becauseyou’re anxious to break away from Yahoo? It seems like a great opportunity to me,licensing policy has helped you out. : , 测 , 们 …… 谋诡计 , 们MY: People are guessing at so many reasons, but we aren’t so...even if we were reallyconsidering those kinds of crafty plots, we couldn’t carry them out. :这 谋,这CEM: It’s not necessarily a plot, just an opportunity. : , 们还 90 , 觉 该 该 ,这 则 这 ?孙 ? 该 , 现摇摇 时 , 应该 ,CEM: There are plenty of opportunities in life, we still have another 90 years. We can takeopportunities as they come. I think that principles on what we should and shouldn’t doneed to be clear. How could you have predicted that Yahoo would turn out like this? Howcould you have known that Sun would turn into this? Anything is possible. But you need toknow what you shouldn’t do, especially when the boat is rocking, you can’t get fierce. Ifhe had got fierce I would have long since joined up with others to mess him up. : 们吗?CEM: Did no-one come for you last year?
  22. 22. : , 购 过 ?MY: Many. Anyone who ever wanted to buy Yahoo came to me. : 过 ?CEM: You were never moved? :MY: People have a conscience. : 为 现 资产CEM: It’s mostly because Yahoo doesn’t have any assets now. : 们 该 须 , 吗 换 话说 过 ,孙 过 馊 , 们 则 , 们 谐 换MY: We have too many things we want to do ourselves, why would we go and getinvolved in others’ business? To put it another way, Yahoo hasn’t done anything wrong,Sun just had a few terrible ideas, and our principles are just different, but we can getalong harmoniously. If it were a few other shareholders today, it might be much worse. :现 问题 进 ?CEM: To what degree is the question of Yahoo’s shareholding in Ali Group solved rightnow? : 们 ,换 话说,换 杂 们 ( 调 ), 话, 觉 对这 满 ,难 , 给 , , 脸 , 责 , 说孙 “ ”, 说 这 讲话? 这 办? 们 , 该 ,该 讲话 较 , ,这MY: We’re in no hurry, or you could say that if it was any other shareholder it would bemore complicated. When we have an opportunity we’ll do it [re-arrange the stock rights],but if there isn’t an opportunity, I think that as long as our customers are satisfied with thecompany, my relationship with the shareholders is my own problem. I don’t have to let thewhole of society know about it. But if there’s conflict with the customers, or with the law ofthe land, I have to get hostile, that’s my responsibility. Arguments between shareholdersare completely normal, I’ve called Sun a bastard, and people say “how can you talk likethat?” That’s what I’m like, so what? In private, we get on very well. On the board, weargue to within an inch of our lives, and afterwards those who need a drink go for one,
  23. 23. and those who want to chat, have a chat. I speak directly, people think I’m very sensitive,but in reality I’m very rational, this huge company isn’t entirely mine.

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