By Li Yuan (李缘)
Issue 583, August20, 2012
Corporation, page 30
Translated by Tang Xiangyang
Original article: [Chinese]
Andrew Yan (阎炎), current chairman of the board of NVC Lighting Technology Corporation (NVC雷士照明), didn’t look too serious as he spoke on the way to the Hong Kong airport. “I’m a simple person,” he said. “I like outdoor sports. But I’m too busy to do that these days.”
While talking about the strike at his company over the resignation of its former chairman, Wu Changjiang, Yan got more excited. “Wu has been a liar throughout,” he said.
He emphasized that most of NVC’s workers didn’t know the truth about Wu’s resignation and how [French-based] Schneider Electric became a shareholder in the company. If they did, they wouldn’t have gone on strike.
But what is the truth?
The board of NVC published a nine-page investigation report detailing Wu’s improper behavior; including certain transactions and his personal financial management. The conclusion was that “It’s improper for Wu to be re-appointed as director and chairman of the board.”
Yan said that Wu had transferred company assets into his own pocket and had hidden his illegal behavior from the board. “I tried to stop him,” Yan said. “But it didn’t work. We’re worried he’ll rob the company if he comes back.”
The EO learned that Wu has already left all his NVC shares to pledges (a form of security interest where assets are handed from a pledger to another party to secure the former’s obligations) with CCB International (建银国际) and UBS (瑞士银行). A spokesman for the Hong Kong Stock Exchange (HKEx, 港交所) said that the largest shareholders of listed companies are required to make public their pledged shares.
Today (Aug 28), the NVC board of directors will meet to decide on whether or not to re-instate Wu Changjiang. The EO spoke further with Andrew Yan about NVC and Wu Changjiang
Economic Observer: Wu said he was forced to resign by you and Schneider.
Andrew Yan: Wu has been a liar throughout.
Why did Wu resign? Neither the investors nor Schneider forced him out, but he went to Hong Kong on May 20 and called me. He said the Commission for Discipline Inspection (of the Central Committee of the CPC) had talked to him. He planned to go to Canada with his wife and stay there for a while. The investigation report says he bribed Xia Zeliang (夏泽良), former party secretary of the Nan’an District of Chongqing City. He signed a contract with government officials to employ them as “consultants.” The payment was 4.5 million yuan, with three million already paid. He resigned for his wrong-doing and couldn’t perform the duties of a high executive. He was lying when he said we were forcing him out.
NVC is a listed company. We cannot tell anybody before the formal announcement. That’s unfair to us.
EO: On Aug 15 Wu said on his Weibo he was planning for a “special conference of shareholders?"
Yan: I won’t make any comment on that. There are rumors. We are still trying to learn more. He owes banks 600 million yuan and owes NVC 60 million yuan. We’ve heard he also had other debts. We don’t want him back now. One of the reasons is we’re worried he would hurt the company to meet his own interests.
EO: Wu said on Aug 16 in Beijing that you were manipulating the stock prices by taking advantage of his resignation.
Yan: It’s completely untrue. During this time we didn’t buy or sell a single share. How could we manipulate the price? But Wu did. He bought company shares without informing the board, expecting the price to go up; but it was offset by securities companies later selling their shares on July 25 when he announced his resignation. He lost a lot of money.
Neither I nor the company have received any investigation notice from the Hong Kong Stock Exchange or the China Securities Regulation Commission (CSRC). We will certainly cooperate if they investigate, but spreading rumors is illegal.
EO: The striking workers said on July 13 that they wanted executives from Schneider to resign. Then Li Rui (李瑞), former deputy president and Li Xinyu (李新宇), former general manager - both from Schneider - quit their jobs. Did they resign on their own or was it a decision by the board? And what about the relationship with Schneider?
Yan: Schneider was introduced to NVC in 2011 by Wu Changjiang. He did it to strike a balance with SAIF Partners and Goldman Sachs. Schneider only has 9.13 percent of the shares and one position on the board. How could Wu say Schneider was taking the company as its own?
Schneider didn’t ask to manage NVC, but we invited them in. All this happened before Wu’s resignation. Schneider had good intentions.
Michael Zhang, the guy who took care of international sales, resigned one-and-a-half years ago. NVC had no English-speakers then, so we asked Schneider for help this February. Li Rui and Li Xinyu had been approved by Wu before they joined NVC. I’ve never seen Li Xinyu. NVC, not Schneider, had been their employer since the first day they joined.
They resigned because they couldn’t accept the current situation of the company. I pity Schneider. They were offering a hand, but people say they are criminals. That’s unfair.
EO: Independent, non-executive director Karel Robert den Daas also resigned. His reason was having “differences” with the company’s direction, as stated in the announcement.
Yan: He used to work for Philips. He also has some special feelings toward Schneider. He’s old and has his own way of thinking.
The board now has seven members. We’ll have new members in the next three months. It’s not bad to have different opinions on a board. It should have different voices.
EO: What’s the main problem now?
Yan: The company has gone back to normal. The board established a temporary management committee after the strike on July 27. Deputy President Mu Yu (穆宇) is taking care of it. They will be responsible for the operation. I’m not worried about new strikes. Most workers don’t really know Wu Changjiang. If they really knew him, they wouldn’t have gone on strike.
Wu Changqing (吴长青), Wu Changjiang’s younger brother, had been taking care of the distribution system. But he purposely didn’t send off goods after distributors confirmed orders. Things are now becoming better. I dare not say 100 percent of the orders have been met, but no distributors are complaining. Sure, we are preparing for the worst situation - another strike for example - but in fact, many workers participated because of peer pressure, lies and blind patriotism.
EO: Will NVC move its headquarters from Chongqing back to Huizhou (惠州)?
Yan: At the end of last year, Wu signed a contract with Nan’an District of Chongqing to move the headquarters there. He didn’t inform the board. But he promised to have a sales volume of 10 billion yuan and pay taxes of 500 million yuan in three years. The Nan’an government offered preferential policies, including a one-time subsidy and land; but Wu put the land under his name.
As for the question about whether to move our headquarters from Chongqing back to Huizhou, it's not our top priority now. Hundreds of our employees have settled down in Chongqing. We have to think about that.
EO: What’s your personal plan with NVC?
Yan: I didn’t want to accept when the board nominated me to be the chairman. But it’s my responsibility to accept it. But I’m a non-executive. I’m not responsible for the company’s daily operations. I won’t be the chairman for long. On the one hand, I’m not an expert on lighting. On the other hand, SAIF partners have invested in more than 200 companies in China. It’s impossible for it to spend much time on a single one. I think there will be a new chairman of board in three months.
EO: How do you see this crisis?
Yan: The core is, if a private company wants to be strong, it has to obey rules. Many of those rules are just common sense. For example, one can’t transfer the company’s assets into their own pocket.
Before 2006, NVC was just a low-technology lamp company. SAIF Partners invested in it and led it to purchase the Zhejiang Jiangshan Sanyou Electronics Co. Ltd. (浙江江山三友电子有限公司). In 2009, we purchased Shanghai Akad (上海阿卡德公司).
If executives at Chinese companies resort to populism whenever they make mistakes or the company has an operation problem, the company won’t see further development.
