January 20, 1978.
Lin Baicheng once again arrived at Hutchison Whampoa — today, the company was holding a board meeting.
Hutchison Whampoa had a total of nine board seats.The Qidexun family, the major shareholder, and HSBC each held two seats. Among management, Richard and Chan Sing-han each held one of those seats on behalf of the Qidexun family and HSBC respectively.The remaining two seats were held by Jardine Matheson and another British shareholder.
Jardine held only 3% of Hutchison Whampoa — not much — but it was the highest among individual shareholders, and its corporate strength earned it a seat on the board.
The other British shareholder, Bob, happened to hold 5%, and given the highly dispersed shareholding, this entitled him to a board seat, which he personally occupied.
Once the meeting began, Lin Baicheng automatically became a board member — and Chairman of the Board — simply because he now held the largest shareholding of Hutchison Whampoa.
Moreover, since HSBC had sold all its shares to Lin Baicheng, HSBC's two board seats also transferred to him. If Lin wished, he could remove Chan Sing-han from the board and replace him with someone of his own choosing.
All directors were present for today's meeting.
Lin Baicheng Addresses the Board: "I am honored to serve as Chairman of Hutchison Whampoa's Board. I assure all directors, and the shareholders you represent, that I will grow this company and create greater profits for everyone."
"This is my first proposal — an incentive plan granting equity to management and outstanding employees. I hope for your support."
He signaled to Cheng Yufeng, who distributed the prepared copies.Management had already reviewed this proposal, so the main purpose was to show it to the external directors.
A moment later, Bob frowned.
"Chairman Lin, I don't think this plan is necessary. I admit it may motivate the management team, but it also requires a large amount of company funds, harming shareholder interests. The company functioned perfectly well before without such incentives. I see no need for this."
Lin answered calmly,
"Director Bob, how is this unnecessary? The purpose of the plan is to retain talent — to allow them to grow with the company and contribute more. The better the company performs, the more shares they stand to receive, and the more valuable those shares become."
"Also, the company will use 20% of operating profit to buy shares for this plan. This excludes profits from asset sales, so management won't be able to inflate short-term numbers by selling off assets."
"And in any case, I — and all of you — will be watching. No major asset sale can be executed without the approval of the Chairman of the Board."
When he instructed Cheng Yufeng to draft the plan, Lin had already ensured all possible loopholes were closed. Management would need to stay at least five years to receive their shares — unless they chose to give them up.
Getting talented people to stay for five years was already excellent. Expecting them to stay for life was unrealistic — that only happened in certain Japanese firms, and usually only among low-level workers. True talent always faces headhunting and opportunities to start their own ventures.
With management's support, the proposal passed without issue.
Lin continued, "This is the next proposal: I plan to borrow HKD 500 million from HSBC to strengthen the company's cash flow and support future development."
The director representing Jardine immediately objected:
"Chairman Lin, the company already has HKD 1.3 billion in debt. Adding another HKD 500 million — isn't that too much?"
The director representing the Qidexun family added,"The company already pays massive interest annually. Increasing debt seems unnecessary."
Bob was more direct:
"I oppose this proposal. The company already owes enough. Taking out another loan adds no value and only increases the burden."
Lin replied:
"If we want the company to grow, we need more capital. Yes, our liabilities are high — but that is not a reason to stop borrowing. If we need funds, we must dare to take bold action."
Bob responded sternly:
"Chairman Lin, I urge you to reconsider. Even if you want a loan, we should at least wait until the short-term debt is paid. Otherwise, the company's profits this year may be swallowed entirely by interest payments."
Lin answered:
"We are borrowing in order to grow — to make money. So our operating profit this year will not be affected by this loan."
"That's all I have to say on the matter. Let's proceed to a vote."
He looked toward William and the other five members of senior management.Whether the proposal passed or not wasn't the point — he wanted to see who truly supported him. Anyone who refused to cooperate would be removed later.
"I support Mr. Lin's proposal.""I agree as well."
William and the others were smart — they all voiced support. The motion passed.
They understood clearly that Lin was both largest shareholder and Chairman. The company would eventually follow his direction. Opposing him would be pointless; anyone unhappy could simply resign. Betrayal was meaningless — the chairman could dismiss any director holding less than 15% of shares.
Only shareholders with more than 15% automatically gain a board seat by law — a protection for major shareholders.
Bob and the others opposed the motion — but it didn't matter. The majority approved it, so Lin's proposal passed.
Bob and the other external directors now understood the situation: From now on, Hutchison Whampoa's development would follow his will.
They now had two choices: remain and watch until Lin made a mistake, or sell their shares and leave everything to him.
They did not decide immediately. They would observe Hutchison Whampoa's performance in the coming period before making any final decisions.