[UPDATE] Tough-Talking Jack Ma Admits Acting Unilaterally in Alipay Controversy

[UPDATE: July 8th, AM – We’ve been contacted by Alibaba Group representatives who claim that there are “factual errors and bad underlying info” in the source, the China Entrepreneurs Magazine (CEM) interview. On the understanding that CEM will amend and correct its post shortly, we’re amending some aspects of the first-person quotes attributed to Jack Ma.]

[UPDATE 2: July 8th, AM – Also, we’ve be contacted by CEM’s English Editor who admits grave errors in their transcript, saying, “We found some mistakes that may cause people’s misunderstanding.” CEM’s official notice and apology is here. So, we’ve removed the PDF transcript that had been embedded at the bottom of the post, and also deleted the offending passages from CEM’s inaccurate initial transcript. A corrected transcript will be issued shortly. Apologies to our readers for running with the source’s inaccurate text.]

Jack Ma, the Alibaba founder and CEO, has finally spoken up and revealed the thought-processes behind his controversial and cavalier transference of Alipay away from the Alibaba Group – a move that left Yahoo (which owns 39% of the Group) embarrassed, and exposed just how in the dark the American firm is about Alibaba’s inner workings.

In a tough-talking, exclusive interview today with the Chinese-language China Entrepreneur Magazine, Ma admits to unilaterally shifting its online payment platform Alipay away from the Group, with full consent from neither the board of directors nor Softbank or Yahoo.

Mr. Ma paints it as a necessary move – and, importantly, a fully legal ploy – for Alipay to get a crucial government-mandated online payments license, where the Group’s majority foreign ownership (Japan’s Softbank owns 29.3% too) would have been an issue at state-level.

Jack Ma vigorously defends himself and emphasizes what a difficult, time-sensitive position he was in, saying:

I’m standing here with the Central Bank of China on one side, and they’ve [Softbank and Yahoo] squeezed me out and made me out to be the bad guy ….. I’ll tell you, this matter wouldn’t have even been approved with ten times the time. Why? Sun [Zhengi; of Softbank] has countless investments. If Alibaba were to die, sure, he’d be sore, but to him it’s one of many. To us, it’s everything. Yahoo is in a similar situation.

As part of his bold move, Ma terminated the “variable interest entity” (VIE) that usually safeguards the assets of foreign owners in a firm, as he realised at the start of the year that he was in this bind – facing three options to move forward, or risk seeing Alipay being shut down by authorities for the lack of proper paperwork. The interview makes clear that Ma favored termination of VIE and organizing compensation later; Softbank’s Sun Zhengyi preferred to maintain the VIE but lie about its existence to the State Council (which is technically illegal); while the third option was to keep VIE and go through due process, with a heightened risk of Alipay failing to get its license. In Jack Ma’s own words, Yahoo CEO Jerry Yang “was sitting on the fence”. And so Ma unilaterally made his move.

“I don’t like politics, I don’t play at it”

Jack Ma’s actions this year have made him into something of a hate figure in tech circles in China, with some accusing him of worsening an awful June for Chinese tech IPOs by heightening uncertainty and making Chinese tech firms look risky. As for Yahoo, they’re now facing a class-action lawsuit by some shareholders accusing Yahoo of not being sufficiently in control – and those claims might be strengthened by Ma’s words in this interview.

Yahoo’s Jerry Yang comes out badly from this, for sitting on the fence for so long over the license process issue. Jack Ma also believes that Yang made the wrong move in how he handled the news, adding, “he should have immediately told the Yahoo shareholders, but he waited until May to tell them.”

[Source: China Entrepreneur Magazine]