By GAO Jing, MA Yueran, ZHUANG Jian
Hoshine Silicon, China’s largest silicone material producer, is the scene of a family feud between the chairman and his former lieutenant.
The long-simmering conflict erupted into public a month ago, and it’s the stuff of a big-budget miniseries.
‘According to his wife…”
The wife of general manager FANG Hongcheng popped up on social media, with a 4,000-word blog post. That’s about eight pages of an old-fashioned newspaper. She accused founder and chairman LUO Liguo of cheating Fang out of incentives he was entitled to and cited a court ruling in Fang’s favor.
Luo, she charged, then came up with a public environmental case. If the local authorities wanted their troubles to go away, all they had to do was find a reason to throw Fang into jail. Which they soon did. Along with his brother.
Hoshine’s factory complex in Pinghu, Zhejiang, is at a standstill. When Jiemian News visited, the vast compound of pipes and towers was deserted. No one was in sight but a security guard, who shooed us away when he saw our cameras.
Luo is unreachable. The only time he answered the phone, he said he was in a meeting, and that Hoshine would issue a statement and hung up.
Never give up
Hoshine refused to deliver around one million yuan (US$140,000) of Fang’s anticipated 1.3 million yuan of stock options, on the grounds that he left his job within two years of the granting date. The dates, at least, are not in contention.
That he had “adversely affected the company's interests,” as Luo claims, was rather more open to opinion. Fang sued and won in 2021. Luo appealed and an arbitration court confirmed that there was no adverse impact and ordered Hoshine to pay. Luo then claimed he had found new evidence and asked the case be reopened.
Torrent of litigation
Let’s not forget the magnitude of this case. One million yuan, for many, is still a lot of money. It’s the price of the Zeekr, Geely Automobile's top of the range EV, or a broom cupboard in Shanghai. Six years ago, when the drama really began, you could buy a lot more, but probably not an EV.
Simultaneously, criminal charges were brought against Fang over illegal processing and sales of hazardous waste, a serious environmental charge, and one that twice has been thrown out of court.
Luo claims no knowledge of the entire affair - Hazardous waste? No idea - but Fang's wife maintains that Luo not only helped set up the facility but was directly involved in selling the waste.
Employees said it was unlikely that Luo was in the dark. Financial and operational reports were routinely submitted to him. A Hoshine statement declared sales of hazardous waste as 0.5 percent of revenue.
The case was dismissed twice and was thought to have been forgotten about until Hoshine threatened to move its headquarters out of Jiaxing and local investigators promptly arrested Fang and his brother. The case is still awaiting trial. Needless too say the stock options have not been delivered.
Spring comes to Hoshine
The story, in a modern setting, is a very old one. Versions are easily found in Shakespeare, The Water Margin or Greek myth.
Fang was once Luo’s right-hand man, and possibly anointed heir to the Hoshine throne. It’s pretty fair to assume that Luo may have used the phrase “like a son to me” more than once in reference to Fang.
Fang joined Hoshine in 2009, four years after Luo founded the company. Despite being one of the few domestic manufacturers capable of mass-producing industrial silicone materials,- in high demand during China’s construction boom - Hoshine struggled with workplace safety and chaotic management. Hired as a sales manager, when the heads of production all jumped ship, Fang was put in charge of the factories - already in a sorry state - despite having no experience.
Luo, a serial entrepreneur, was bold, blunt, and cursed like a sailor. Fang, a career manager 18 years younger than Luo, was meticulous, considerate and well-loved by workers. He standardized procedures, improved workers’ benefits, and, as multiple employees recall, was “very hands-on with assembly line issues.”
Hoshine grew rapidly, becoming the largest industrial silicone producer in China in 2013. Luo and Fang made an unlikely duo as they walked hand-in-hand in the golden sunlight of massive profits. In 2017, Hoshine went public in Shanghai, with the market cap soaring to 18 trillion yuan on the first day of trading.
Fang resigned just as sales broke through 10 trillion yuan. In 2019 demand for industrial silicone fell and took Hoshine with it. Profits fell by 60 percent. But few industrial materials are as resilient as silicone, by 2021, Luo’s personal wealth pushed north of 100 billion yuan.
Autumn of the Patriarch
But the market turned again, Silicone tanked again. Hoshine sales are still growing, but profits have halved. An 18-trillion yuan market cap is a very distant memory.
Hoshine has been trying to diversify into photovoltaics but the industry is already overcrowded. Regardless, the Lou’s announced plans for a 43-billion-yuan factory. But with close to a 60 percent debt-to-asset ratio and only 15.6 billion yuan in the bank, it’s hard to see the project moving beyond the announcement stage.
Luo wisely elevated his children and relatives to top positions with his golden boy gone. Unsubstantiated family rumors suggest that a power struggle with his son Luo Yedong led to Fang’s flounce. Luo Yedong, now 30, took over Fang’s job and his sister Luo Yi became deputy chairman. At the height of Hoshine’s fortune in 2021, she was the richest woman in Zhejiang Province.
Luo Yedong, reportedly, is a micromanager. Workers often have their salaries deducted if they make mistakes. Hoshine has been involved in 15 labor dispute cases in the past three years, most of which went against it. Several senior managers, including the secretary of the board and statutory auditor, resigned in the summer. Many of them are also suing Hoshine for unpaid incentives.
If it is a miniseries, it isn’t easy to see things working out well for Team Hoshine in season two.
