Case of’s Liu offers lesson in complying with foreign laws, protecting investors

By Hu Weijia Source:Global Times Published: 2018/9/5 22:28:42

Three US law firms have reportedly announced that they are investigating whether China's e-commerce giant Inc issued misleading statements or failed to disclose information pertinent to investors after its CEO Liu Qiangdong was detained for a night in the US state of Minnesota last week on suspicion of alleged sexual misconduct.'s shares plunged on Tuesday in Nasdaq trading. Some of the law firms said they will invite shareholders who suffered big losses to participate in the investigation.

The investigation has made not only Liu but also a focus of public opinion. If cannot properly protect shareholders' rights and doesn't comply with regulations, the case may reflect negatively on's brand image in the US.

Some enterprises depend on their founder's skill, reputation or charisma in their initial phase but operate as a modern enterprise when they become leaders in various areas. is now China's second-largest e-commerce player with more than 160,000 staff. Liu's alleged misconduct will not have a major impact on the company's profitability due to the e-commerce giant's solid fundamentals.

It is too early to make any conclusion on whether the company made statements regarding Liu's case to mislead shareholders. But if it chooses to protect its CEO instead of its shareholders at the cost of breaking the law, this would indeed be an unwise decision. Liu's case is a tough test for in honing its crisis management ability to deal with the business environment in overseas markets. For companies like, a US listing can provide some benefits but will also bring an array of challenges. The Chinese e-commerce giant needs to understand the differences between the Chinese and US legal systems, and have much stronger awareness of information disclosure.

Chinese companies are in the midst of a boom in outbound investment, and many of them as part of this trend have chosen to go public in the US.

How to cooperate with US investors and comply with laws should be a compulsory course not only for JD but also other US-listed, China-based companies.'s case is a legal lesson for such companies that can teach them how to hone their crisis management ability.

The author is a reporter with the Global Times.


blog comments powered by Disqus