Battle Between Founder, Investors Closes Lighting Firm
NVC Founder Wu Changjiang
(Huizhou) – A battle between the founder of industry leader NVC Lighting Holding Ltd. and shareholders has spilled over into strike that has closed the company since July 13.
Workers at plants in Huizhou, Guangdong Province and in Wangzhou, Chongqing are demanding the return of the company founder, Wu Changjiang, who recently resigned as CEO and chairman. On the same day, 36 regional distribution centers stopped taking products from NVC.
One day before the strike started, NVC employee representatives and distributors held a meeting in Chongqing with the board of the Hong Kong-listed company and presented a formal request for Wu's return. The board said it will deliberate and reply in three weeks. Meanwhile, NVC suspended trading in the Hong Kong bourse on July 13 on price-sensitive information.
The showdown is the latest chapter in a dispute between its founder and investors over the control of China's largest lighting products manufacturer. Triggered by a political probe, the conflict is rapidly escalating – workers at July 12's meeting wanted the local government's involvement to find a solution – and is yet another example of a domestic industry giant coping with the rules of the capital market.
"If I pull out, the company will be in deep trouble," Wu said.
Yan Yan, head of NVC's largest stakeholder, SAIF Partners, said he was surprised by the massive protest from company management and distributors, but would not bend. "In the worst-case scenario, we go and find new distributors and the company stock will suffer for about two years," Yan said.
Some investors have claimed weak corporate governance and hinted at financial irregularities under Wu, accusing him of making reckless related-party transactions. Loyal supporters of Wu, also the largest stakeholder at NVC, claimed at the July 12 conference that his ouster was the result of an alliance between international investors and a foreign industrial giant aiming to take over a major domestic brand. They say NVC can hardly continue operating without Wu.
Wu, a Chongqing native, was investigated by government watchdogs in May for alleged connection with Xia Zeliang, party secretary of the city's Nan'an District. Xia was detained in March during the storm over the wrongdoings of Chongqing's former party boss, Bo Xilai. Wu left China when the probe closed and remained overseas until July 12.
Yan says company lawyers suggested Wu's resignation because of uncertainty incurred by the probe, and Wu signed a resignation letter on May 24 in Singapore. Yan became president of NVC, and Zhang Kaipeng, a former official at Schneider Electric, was named the CEO. However, Wu said in a microblog post a day after his resignation that he would not give up NVC and would launch a comeback.
Since then, Wu and Yan have met three times and reached an agreement that Wu can assume the position of company president under three conditions: inform the board details about his investigation, end all transactions outlawed by Hong Kong securities regulation and obey decisions made by the board.
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