Corporate drama: Boorish CFO out of job after booting out bearish analyst
The resignation of the chief financial officer of China’s PAX Global Technology days after he ordered an analyst from Macquarie Group to leave the earnings briefing in Hong Kong on Aug 10 has a lesson to the corporate world. No matter how talented you are, be nice to clients, especially if they are not your cheerleaders. In the case of Chris Lee, his impeccable five-year record was spoiled by a 30-second video of his heated exchange with analyst Timothy Lam.
A week is a long time for politics. In business, the tolerance interval might be even shorter.
Less than a week after reciting the famous Donald Trump’s line to an unfriendly analyst, Chris Lee, the chief financial officer of PAX Global Technology, a Hong Kong-listed mobile payment company, tendered his resignation after the short “You are OUT” video (Watch the clip) went viral in Central, and other financial centers like Wall Street.
Thanks to the social media, coupled with the juicy reports from global financial papers, the incident quickly developed to the point of no return (and excuse too!). No one seemed to have any sympathy for the arrogant Chief Financial Officer, an award-winning executive who was almost unheard of before.
In a statement to investors and the media, Lee admitted that his personal behavior fell short of professional standards, and hoped that his resignation would resolve all related issues. PAX also confirmed that Lee had resigned due to personal reasons with immediate effect.
It was a nightmare that would keep haunting the 39-year-old corporate high-flyer because it came only one month after he was awarded Asia’s best CFO (Technology/hardware) by Institutional Investor magazine.
Now it seemed more like an irony that PAX, which bragged about its constant excellence and professionalism in the July 11 press release, was also awarded Asia’s Best Investor Relations (IR) and one of the Asia’s most honored companies, along with sweeping other IR awards.
PAX, under the magical hand of Lee, produced an enviable 326%, or a compound annual growth rate of 38% during his five-year tenure.
All came with an about HK$4 million ($512,000) annual compensation package for the CFO, who is also joint company secretary and investor relations officer. To borrow an analyst’s jargon, he is a “screaming buy.”
Given his value-creating capabilities, there are little worries on his next adventures. But before that, there are things to learn from this corporate drama.
First, integrity. No matter how talented, or cool you believe you are, how you treat people ultimately tells all.
As in this case, an impeccable five-year record with top recognition could be killed by a 30-second video.
To recall, Lee over-reacted to Macquarie Research analyst Timothy Lam who was among the invited participants on a post-result analyst briefing at 2 pm on August 10.
“If he doesn’t go out, I am not going to present anything,” Lee was heard screaming “out” in the video. “Out, you don’t have the right to stay here.”
As a result, Lam was out of the room, but Lee was out of the job.
Supposing the corporate host has rights in the by-invitation briefing as to who should be attending, still his arrogance sent chills down to the covering analysts.
Why the over-reaction? Macquarie made an “under-perform” call to PAX, the only negative call made by a dozen other analysts, on April 15 when the stock price was HK$7.18 because of worries on its shipment growth.
With hindsight, that was the peak of the stock in the past four months. The counter was closed at HK$6.21 on August 17.
News travels fast. By the end of the day, the video reached other investors and eventually to media and public. Everyone had almost the same reaction – how can things like this happen here?
The public anger prompted Lee to issue a personal statement that began like this:
“I would like to express my regrets as to my own behavior during the briefing yesterday and welcome all the diverse points of view and perspectives toward the company and myself; regarding this issue, I am not against anyone or any institution that expresses their views…
“In order to protect the mutual benefit between the listed company and investors, I wish analysts to act with due diligence and be earnest with respect to writing the facts.”
The 324-word statement ended with the emphasis that it was a one-off incident, and not representing the standpoint of the management.
However, his apology seemed to stir up even more criticism. Some CFOs I talked to were surprised how this message, which they understand and share, could get into black and white format.
In other words, Lee had the right to swear and scream, according to other CFOs, but not in public, because they are working in listed companies. And listed companies are always scrutinized in public domain.
What happened inside the board room after Lee’s apology was anybody’s guess, but the outcome was not unexpected.
Final advice: be nice to your clients, especially if they are not your cheerleaders. Do not upset them, or you will be upset – as a clear lesson seen in this story.
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