Resign, Flee, Get Arrested: A-Shares Executives Dropping Like Flies

Wealth, fame and fortune, passing through the clouds.

21st Century: 离职、跑路、遭刑拘…… A股“董事长”风光与压力

On October 11, A shares reappeared in a thousand-yuan limit, and the Shanghai Composite Index fell below the 2600 mark...

The pressure on the chairman of more than 3,500 listed companies in A-shares is enormous. And they used to be the "most prominent" role in the capital market.

On the evening of October 10, Hu Chengzhong, the chairman of Guangdong Ganhua (000576.SZ), resigned, less than one year from the beginning of his current term. One day ago, the chairman of Fujian Cement (600802.SH) and Yatong (600692.SH) also waved goodbye to this position.

These are not isolated cases.

According to the statistics of the 21st Century Business Herald, as of October 12, 386 chairmen of 376 listed companies have announced their departure.

The departure tide is not sudden.

According to the analysis of Zhongtai Securities Research Report, as of October 10 this year, more than 8,000 directors of A-share listed companies have left their posts, whether board members or executives they have surpassed the number of 2017 exits by 1000.

In terms of industry distribution, in the real estate and construction and decoration industries, 40% of listed company executives and directors have more departures than last year. In addition, 16% and 26% of utilities and leisure services companies also saw higher departure rates than in 2017.

Most executives and directors are leaving for business reasons such as mergers, changing business conditions, losing shareholder elections.

On the whole, personal reasons or job adjustments, changes, and general elections have become the main reasons for the resignation of the chairman.

But more than a few are falling into legal and financial difficulty.

Others who left the board of directors had to resign because they were put on file for investigation or were about to fall into a trap.

In May of this year, Zhu Xi, chairman of Tenjin Entertainment, was investigated by the China Securities Regulatory Commission and subsequently announced his resignation in September. Similarly, Sun Jiexiao, chairman and general manager of Chunxing Seiko.

On August 27, Jiuyou announced that the chairman Han Yue was criminally detained by the Shanghai Public Security Bureau Fengxian Branch for allegedly illegally absorbing public deposits. Although Han Yue has not resigned, the nine shares have been represented by the vice chairman.

And then there are the disappearances.

In addition to the normal resignation of the chairman of the board of directors, in the past three years, the chairman of the A-share listed company that lost contact (excluding being directly detained) has 11 people.

Wang Xianyu, former chairman of the *ST Bus Online (002188.SZ) who lost contact for more than 260 days, undoubtedly impressed the market.

As early as December 9, 2017, the *ST Bus Online announced that when the company and related parties planned to purchase major assets of the media industry, efforts to contact the company’s legal representative, director and general manager Wang Xianyu were repeatedly unsuccessful. Relevant documents could not be signed on time and it was decided to terminate the reorganization.

Since then, the *ST Bus Online has been caught in a long journey to find the chairman.

Until July 16, 2018, the 4th Board of Directors of *ST Bus believed that "Wang Xianyu, as a director of the company, has not been able to attend the Board of Directors for 9 consecutive times and has not entrusted other directors to attend, and has not been able to attend the shareholders meeting for three consecutive times (including 2017). The annual general meeting of shareholders) is no longer suitable for continuing to serve as a director of a listed company, thus eliminating the need for directorship.

Coincidentally, after the close of August 20, Steyr (000760.SZ) announced that it was unable to get in touch with Chairman Li Xiaozhen in recent days.

It is worth mentioning that Li Xiaozhen is the 80-year-old chairman of the board of Steyr, because the former chairman of Steyr resigned for personal reasons.

On August 21, Steyr fell to a limit and closed at 7.67% on August 22.

Until September 27th, Steyr announced that “Since the company’s controlling shareholder Shandong Yingda Steel Structure Co., Ltd. involved an economic dispute with a natural person, Li Xiaozhen was the former party of the matter and was taken by Shandong Binhai Public Security Bureau from 2018 8 On the 11th of the month, he was forced to detain to assist in the investigation. Fortunately, Li Xiaozhen was not arrested by the People's Procuratorate and was released on bail on September 17, 2018.

On October 12, the 21st Century Business Herald reporter called the Steyr Securities Department several times, but no one answered.

Coincidentally, for Yang Zishan, former chairman of Nanfeng (300004.SZ), the "May 1" holiday in 2018 may be extremely difficult.

Seven years ago, Yang Zishan, who was one of the representatives of the "second generation" in South China, who took over from his father, was exposed on May 3. On the evening of May 7, further news showed that Yang Zishan’s personal debt may involve the company about 380 million yuan.

Since the resumption of trading on May 7, the share price of Nanfeng shares has dropped from 11.3 yuan before the suspension to 3.92 yuan, a drop of more than 60%.

Since then, Nanfeng has been subject to litigation related to private lending, totaling 220 million yuan; on June 28, the CSRC investigated Nanfeng shares, and then deputy general manager Zhou Hui also announced his resignation.

The loss of more than 140 days is also the chairman of Taihe Health (000790.SZ) Wang Renguo.

In fact, the head of the "Taihe Department" has been lost for the second time. Because of the Sichuan-related cases, Wang Renguo disappeared on January 2, 2018, and reinstated on the 19th. Less than four months later, Wang Renguo Once again lost, the vice chairman Li Xiaoping will perform the duties of the chairman.

The loss of Wang Renguo also directly affected Taihe Health's business in 2018. The company's net profit in the first half of the year decreased by 58.13%, and total assets shrank by 20%.

According to media reports, Wang Renguo is eager to sell the core assets of the “Taihe” (Taihe Group and its subsidiaries) to ease debt pressure.

In the process, there are also listed companies encountering an oolong side.

On March 24 this year, Yili shares (600887.SH) had to issue a clarification announcement, saying that Chairman Pan Gang had not been taken away for investigation, and the news about his loss was rumored.

Overall, the impact of executive departures is mixed as long as they're not fleeing prosecution and/or financial crimes.

Zhongtai Securities pointed out in the article "Following the Risk of Separation of Executives under the Pressure of Lifting the ban in the Fourth Quarter - Observation of Market Funds" that many listed companies have changed their executives and have two main effects on the company's stock price.

The first one is the phenomenon of “backing black pot”. “When a listed company faces a decline in performance and faces significant risks in its business activities, it is a way for the company to find a 'scapegoat'.” In this case, if the newcomer does not have the ability to match his position, The performance of the company fell, the company's stock price may face further bottoming.

The second is positive incentives. Zhongtai Securities pointed out that if the management of inferior performance is replaced, the newly appointed management can stop the loss in time, which will obviously promote the stock price.

It combed this year's data and found that 50% of the listed company's share price fell on the first day after the chairman's departure. After one week, after January, the proportion of the decline has been rising. Therefore, from the statistical sample of this year, the replacement of the chairman of the board has a very limited effect on the stock price.

The simplest explanation for executives is a simple one: as the heat rises, they're getting out of the kitchen:

"In the context of economic turmoil, the risk rate of operating enterprises is getting higher and higher. Many of the chairman of the board are bosses. They like to control the company and rush to the forefront. But now, once the company has a problem, the executive responsibility is investigated, now hand the company over to others to manage, and control some big directions," the company executive pointed out.