Niu Gensheng, 53-year-old founder and chairman of Mengniu Dairy Group, one of China's top dairy enterprises, resigned from his position last week. He plans to devote most of his time to charity, a long-cherished dream of his, but he will continue to be a non-executive director and play a part in making corporate strategies and plans, according to a statement released by the company's board on June 11.
However, the departure, instead of winning warm applause for his benevolence, has stirred up speculation over his future.
"The resignation was expected," said a source, "because his focus was not on Mengniu anymore. He has already opened a second front."
Early in 2005, Niu pledged to donate all his shares of Mengniu. He promised that for the rest of his life 51% of the dividends will go to charity, and after he dies, the proportion should rise to 100%.
According to Tian Lei, an employee at Niu's charity platform, the Lao Niu Foundation, despite the dividends of Niu's shares and donations from senior managers, capital from liquidating stake in 2009 were the main cash sources for the Foundation, which has donated about 900 million yuan ($139 million) so far.
However, the cash inflow did not come easily, and aroused hot debates due to the milk scandal in 2008.
A bad year for Mengniu
That year, Mengniu's milk powder samples tested positive for melamine. The reputation of Mengniu and Niu Gensheng were seriously damaged and the company's shares dropped sharply. Mengniu soon came into capital trouble. After securing a capital injection from the state-owned China National Cereals, Oils, and Foodstuffs Corporation (COFCO) in 2009, Mengniu overcame the capital shortage.
The deal brought 955 million yuan ($148 million) to the Lao Niu Foundation, making its total assets 4 billion yuan ($618 million).
Nobody knew exactly how big the capital hole was. But according to the same source, "If COFCO had not helped Niu, he would have gone bankrupt." Therefore, Niu's resignation was seemingly more like a way to show that he was responsible for the scandal somehow.
"The resignation was just a graceful departure," said the source.
On December 28, 2010, Mengniu announced that Niu had transferred all his equity interests registered in his name to an irrevocable trust, namely Hengxin Trust, for charity.
"Fulfilling my promise to donate my equity interests as part of giving back to society has been my wish for many years. As charity is a long-term community concern, I will continue to do my utmost to build a better society through participation in charitable activities," said Niu.
"In the Lao Niu Foundation, Niu has no decision-making power and would not be involved in the operation of any specific project," said Tian, adding that Niu could still influence the Foundation by playing a part in making plans, connecting the Foundation to others through his wide social networks, and promoting its public services via attending charitable activities.
Niu will be the main donator and the honorary president of the Foundation, according to Tian. "Currently, there is no change in Niu's role in the Foundation. He was quite devoted to the charity before this and will remain so. Maybe in the future he will spend much more time on it."
