The announcement of yet another Chinese tech founder stepping down from the frontlines has people rushing to point the finger at Beijing. Yet executive retirement, especially in the transitional phases of a company, should be celebrated and encouraged.
Zhang Yiming, who started content platform ByteDance Ltd. in 2012, will relinquish the chief executive officer position to college buddy and co-founder Liang Rubo by the end of the year, he announced in a letter Thursday. The action is similar to Colin Huang’s exit from the chairmanship of Pinduoduo Inc. in March, after departing as CEO last year.
In both cases, the moves by young executives — Zhang is 38, Huang 41 — at the height of their power and in the prime of their careers has been viewed as a move to avoid or even appease authorities. China’s rulers, the theory goes, are not particularly enamored with the prospect of rich and powerful people overshadowing the political leadership. So it’s best to jump before getting pushed.
Jack Ma’s downfall after an ill-advised speech railing against regulators in October served as a reminder of who’s truly in charge. Regulators swiftly nixed the Hong Kong listing of Ant Group Co. fintech business, and six months later fined its affiliate Alibaba Group Holding Ltd. $2.8 billion for antitrust infractions.
Investors are so nervous of any perceived slight committed by executives against the government that a post this month from Meituan CEO Wang Xing containing a few verses from an ancient poem — about the misguided attempts of China’s first emperor to quash dissent — saw the online commerce platform lose $26 billion in market value over two days.
There’s nothing to suggest that Zhang has found himself on the naughty list. Indeed, the engineer-by-training is generally considered more shy and low-key than most of his contemporaries, despite ByteDance landing at the center of the US-China tech cold war. The Beijing-based company’s most famous product, short-video app TikTok, drew ire in Washington for alleged data collection that resulted in an attempt by then-President Donald Trump to have it banned and the US division sold off — which didn’t happen.
But with a listing likely in the US or Hong Kong in the coming year, at what’s expected to be a heady and possibly record valuation, Zhang wouldn’t be able to escape scrutiny from China’s leadership. In the current environment, you can possibly get away with being rich, or being powerful, but certainly not both. As my colleague Shuli Ren wrote recently, the nation’s billionaires have tried to downplay their wealth by giving it away, tinkering with company share structure, or burying holdings in conglomerates.
We should look past all that, however, and consider that resigning at this point in ByteDance’s history makes sense. Tech companies are generally started by eager and innovative engineers whose primary focus is to build a product. In the early days, the CEO has a role in how something is designed and built, whom the startup hires, and the way it connects with customers. By the time a company grows to thousands of staff, there’s a good chance the person who launched it isn’t even familiar with the code base, let alone all the engineers who developed it.
After Zhang’s letter was released, writers and analysts seized on one line where he admits that “I lack some of the skills that make an ideal manager,” as if that shows he’s not good at the role. In fact, there’s a sense that he was actually quite adept. The Information, citing colleagues, noted that “he had proven himself more than capable of running a company of more than 60,000 employees.”
But his words, if taken at face value, reflect a curious and innovative engineer whose current role meant that he’s fallen behind in the area that sparked his passion to begin with. “While I do my best to bookmark technical articles online, I haven't had the time to make much progress digging into the area.
During technology meetings, this sometimes means I actually struggle to keep up with the discussion,” he wrote. Pinduoduo’s Huang shared a similar sentiment in March, when he told investors that he was choosing to step “out of the business and the comfort zone to embark on a journey of exploration.”
This kind of self-awareness, and willingness to address it, ought to be recognized and applauded. A company functions best when every staff member is doing the work they’re most passionate about and best-suited to, and this includes management.
This should-I-stay-or-go dilemma isn’t unique to China. US founders generally remain right through the IPO and a long time after. Amazon.com Inc.’s Jeff Bezos only recently announced that he’s relinquishing his CEO position, almost 27 years after starting the company. Yet there are exceptions. Sergey Brin and Larry Page hired industry veteran Eric Schmidt to take over from them as chairman and CEO of Google (later renamed Alphabet Inc.) in 2001, three years before its NASDAQ listing.
Upon stepping down, Zhang plans to spend more time on bigger-picture issues, including strategy and social responsibility, saying that “giving back to society” is an important piece of what ByteDance can achieve in the coming decade. This altruism seems genuine, yet echoes sentiments we’ve been hearing a lot from other tech leaders.
Even Tencent Holdings Ltd., whose founder Pony Ma remains at the helm, told investors this week about its new Sustainable Social Value organization, which will “bring technology benefits to society” while also being a drag on earnings this year. In March, Pinduoduo’s Huang wrote that the business “should create value for the public, rather than being a show-off trophy for a few.”
In China, this emphasis on social responsibility is more than just ticking boxes in an annual report. It’s crucial to survival. Whatever their motives, having founders move on when the time is right is one of the most valuable gifts they can ever give.
Bloomberg
