In September, Alibaba’s IPO valued the company at $25b. This made it the largest and most successful IPO ever. Despite this, Jack Ma has decided the tough trading conditions of Q4 meant 2014 was not an exceptional year for the retailing giant.
In China, is it customary for staff to receive a red envelope just before the Chinese New Year which contains a cash bonus. The giving of envelopes is called hongbao. These bonuses are not mandatory or contractual but they are commonplace and given Alibaba’s phenomenal success. probably expected. Jack has made up his mind though – no hongbao this year.
What a contrast with western businesses.
In the west there is an expectation that a bonus will be paid. The actual amount might depend on company and individual performance, but some form a bonus is demanded.
Despite poor performance or dreadful customer service, the staff expect their yearly reward even though it’s unlikely to be cash in an envelop these days.
In many ways, the deep mistrust that consumers have for banks is exacerbated by the bonus culture. Banks were on the verge of going bankrupt, businesses could not gain access to capital and yet the big city institutions were still paying big bonuses.
It didn’t feel right back in 2008/9 and still doesn’t.
Jack Ma is now unbelievably rich as a result of Alibaba and so are a number of other people and they deserve to be. However, I suspect that the decision to not pay a bonus this year will be popular with customers and external shareholders and in the long run, serve the company well.