No gift policy

JD.com CEO takes small step towards good governance

Richard Liu is taking a small belated step towards good governance. JD.com's chairman and chief executive has pledged to forgo a salary in return for a 10-year option plan that only pays out if the Chinese e-commerce group's share price rises. It's an improvement on last year, when the company paid him a massive stock bonus. Yet Liu's $7 billion stake and super-voting shares mean he is still firmly in charge.

Under the new compensation plan, approved by the board in May, Liu will take a nominal annual salary of just 1 yuan (16 cents) and no cash bonus for 10 years. His only compensation will be options to buy 26 million Class A shares - just under one per cent of the company's total outstanding shares - at a small premium to the current market price. So Liu only makes money from the award if JD.com's stock rises.

For investors concerned about Liu's incentives, this will be a relief. Ahead of the group's initial public offering last year, the board granted Liu what it called "immediately vesting restricted share units" - in other words, stock he could sell right away - worth a chunky $591 million. By contrast, the new options vest over a decade.

Yet it's not clear why Liu needs any extra incentive to boost the share price beyond his existing 16 per cent stake. Every extra dollar on the $44 billion JD.com's share price already adds $225 million to his personal wealth. Besides, Liu has hardly become a champion of shareholder rights. His JD.com shareholding is in the form of super-voting stock that gives him 83 per cent of the votes. According to filings, the board of directors cannot make any decisions without him.

Governance concerns don't seem to have hampered JD.com's performance or share price. Investors have added $11 billion to its value since the start of the year while the loss-making company reported a 61 per cent year-on-year increase in revenue in the three months to June. Even so, as competition with larger rival Alibaba intensifies, questions about past stock bonuses had become unnecessary distractions. Liu's belated step at least ensures investors can no longer criticise his compensation.