Alibaba’s Fraudulent Merchant Scandal
In early 2011, a board meeting by Alibaba’s senior management where Fang Jiang, the integrity and compliance officer, presented a report on the fraudulent merchant scandal affecting Alibaba, with complaints starting from 2009. The report indicated that the merchant fraud was facilitated by nearly 100 Alibaba employees enabling more than 2300 suppliers to bypass the certification process, thwarting the company’s policy for the elimination of fraud. These fraudulent suppliers failed to deliver goods that the customers had already paid for. It was noted that the employees who were involved in the scandal were pursuing performance and financial gain. The middle-level management had failed to act on reports of misconduct, seemingly caring only about the number of merchants signed up for the Gold Supplier Service. This was in sharp contrast to Alibaba touting its focus on customer satisfaction and corporate values.
To show their commitment to Alibaba’s corporate values and culture two senior management personnel resigned from their jobs. The Chief Executive Officer, David Wei and the Chief Operations Officer, Elvis Lee, decided to resign without being prompted to do so. They cited the reason for leaving to be a way to re-awaken the company’s sense of mission and values, such as “customer-first.” The media was sceptical and insisted that the scandal involving only 1% of merchants was not enough for the executives to resign over, speculat...
ing that the change of guard was to be due to internal conflicts in the senior management. There was optimism that the company would recover from the scandal and grow from it.
Alibaba’s Corporate Culture and Values
When Ma started the company, Alibaba’s primary mission was to make it easy for customers to do business. He insisted that rather than earning profit, Alibaba was about helping customers to succeed. Alibaba has kept this culture and its focus is still on giving customers and merchants a platform to prosper. Alibaba instils a culture of teamwork and adherence to the company’s values through training employees, mentorship, and performance evaluations. Subsidiaries of the company are encouraged to build on the core values to create subcultures that are efficient for the subsidiaries’ line of operation. The adherence of the company’s core values as well as corporate culture account for about 50% of the employees’ key performance. Ma insists that Alibaba’s greatest achievement is the company’s focus on organizational culture and values
Alibaba’s core values are fundamental to the company’s operations and their success and growth is attributed to those values. The first value is keeping the interests of their customers first, be they buyers or sellers. Teamwork is the second value; it enables the company, through ordinary individuals, to achieve extraordinary things. The third value is embracing change, encouraging innovation and adaptation to changing business conditions. The fourth value is integrity, honesty and commitment to promises. Passion, the fifth value, enables the employees to approach all issues with enthusiasm and never give up. Commitment and dedication to excellence are highly rewarded and is the sixth value of the company. In addition to these six
core values, the values of insight, being openhearted and identifying talents are upheld. The values are very important if the success of a firm is to meet. Every employee should strive hard to ensure this value is met in the organisation in any working period.