Buried beneath the huge IPO valuation of Alibaba lie anxieties about its corporate structure, which though in a different form echoes those of corporations as diverse as Facebook and the Murdoch companies in denying full authority to stockholders. Whether though the traditional two classes of shares, or Alibaba’s somewhat original arrangement, you can own a share of the company without an equivalent say in how it is run.

There are arguments pro and con such arrangements. In the context of start-ups, the case tends to be that it is vital to keep the founder(s) engaged and at the helm even after capitalization and formal ownership become dispersed. The case with established corporations is more murky. There is significant risk attached to such arrangements, and they plainly fly in the face of any general considerations of good governance. It is as if the standard (and grave) difficulties inherent in the “principal-agent problem” become a platform for emulation and advancement. The sheer size and significance of Alibaba may perhaps raise awareness of this clutch of questions, which have come to notice mainly because of discussion of the location of the IPO. Some exchanges permit these arrangements, others do not, and trends seem to be going in both directions.

Given that transparency and general issues of governance are so central to investors’ concerns about the emergence of major Chinese companies on the global stage, no time is to be lost in building a consensus that the deviant approaches to capitalism of Murdoch and Zuckerberg should be eschewed and not seen as precedents for further prejudicing of good governance.

Alibaba’s IPO Puts VIE Structure in the Spotlight – Risk & Compliance – WSJ.