Gome and Its Battle

Journal of Business Case Studies – November/December 2011

Volume 7, Number 6

Fighting For Control Power Of GOME Inc.:

A Case Study

Yinfang Huang, Hunan University, China

Chia-Hsing Huang, SolBridge International School of Business, Korea

Xueqi Li, SolBridge International School of Business, Korea

ABSTRACT

At 2:30pm, September 28, 2010, a special shareholder meeting for GOME is called by the largest

shareholder of GOME, Guangyu Huang, to be held on the first floor of Regal Hotels, 88 Yee Wo

Street, Causeway Bay, Hong Kong. GOME Electrical Appliances is one of the largest electrical

appliance retailers in Mainland China and Hong Kong. Huang Guangyu, the founder and largest

shareholder of GOME, is currently in jail. The purpose of this meeting is to vote on the eight items

on the agenda, including deposing the professional manager, Xiao Chen, from the CEO position

of GOME. Should the investors support the largest shareholder or the professional manager? It

may be the toughest problem GOME has faced in its history. It seems that no matter who wins, the

result may not be good news to GOME and its investors. This case is about corporate governance

and agency problems and is appropriate for undergraduate and graduate courses in Investment,

Corporate Finance and Financial Markets.

Keywords: Shareholder; Professional Manager; Agency Problem

INTRODUCTION

T

he owner, professional manager, the largest shareholder and the CEO of GOME, are fighting for

control power of GOME Inc. The largest shareholder, Huang Guangyu, called a special shareholders

meeting, which is to be held at 2:30 pm, September 28, 2010 on the first floor of Regal Hotels, Hong

Kong. The founder and the largest shareholder, Huang, who is in prison, proposed five items for the agenda which

the the shareholders are to vote on at the meeting. One of the items is to remove the professional manager, Xiao

Chen, from CEO position of GOME. Neither Huang nor Chen hold more than...