Gome Vote Results: Wong Fails to Take Back Control
Sep 28, 2010
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When all the votes were counted, Gome Electrical Appliances founder Wong Kwong Yu failed to wrest control of the huge Chinese retail company away from the current board.
The general special meeting took place as scheduled today, Sept. 28, 2010, and shareholders voted to keep the current board, including Chairman Chen Xiao.
However, one of the Wong's proposals did pass: a general mandate that would have issued new shares and diluted Wong's stake in the company, was blocked.
As reported in ApplianceMagazine.com news in August and September, hostilities erupted when the Gome board filed legal action against founder Wong Kwong Yu for breach of fiduciary duties as a director and breach of trust. Wong, a high-profile figure who was once considered China's richest man, had stepped down from the leadership at Gome in 2008 after his arrest in China. He was accused of using Gome assets as personal assets, was convicted on several counts including bribery and insider trading, and in May 2010 began serving a 14-year jail sentence.
But Wong, still holding a 34% stake in the company, fired back from his jail cell, proposing Gome cancel a recent mandate that would have diluted Wong's stake and also proposing the removal of the Gome chairman and another board member. Wong nominated his sister to be chairman.
In subsequent weeks, Wong delivered a letter to the Gome board stating that, if the vote results were not what he wanted, he would pull his 370 personally owned retail stores out of Gome. The Gome board said that, if the threat were carried out, it would not significantly hurt Gome.
In mid-September, several news reports claimed Wong was offering financial incentives to board members who delivered votes in his favor. On September 22, Gome filed a letter of complaint with the Hong Kong Securities and Futures Commission.
A post-vote statement from Gome was conciliatory, and said it hoped to "maintain ongoing smooth and effective communication with all Shareholders, including Mr. Wong Kwong Yu."
The statement also expressed a willingness to discuss keeping the Wong-owned retail stores in the Gome network.
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