Alibaba Group Holding Ltd BABA has fired a newly appointed senior executive accused of sexual assault, Bloomberg reported Sunday.
What Happened: Li Yonghe, who was appointed last month to lead Alibaba’s newly created non-retail-focused division, resigned as did his human resources boss for not handling the incident properly, as per Bloomberg.
The sexual assault allegations were reported on August 2 by a female employee and have revealed systemic challenges to the company’s mechanisms, CEO Daniel Zhang said in an internal memo seen by Bloomberg.
“Behind everyone’s deep concern about the incident was not just sympathy and care for the traumatized colleague but also tremendous sadness for the challenges in Alibaba’s culture,” wrote Zhang.
The incident which reportedly involved an external client and other Alibaba executives took place in China’s northeast during a night of heavy drinking.
On Friday, Alibaba shares closed 1.45% lower at $196.39. At press time, Alibaba shares traded 1.91% lower at $24.39 in Hong Kong. On Sunday, Alibaba said it had suspended several members of staff citing a "zero-tolerance policy," reported Reuters.
Why It Matters: There is no clarity on how the incident might affect Alibaba as the involved division, the local services division, was one of the company’s fastest-growing units, noted Bloomberg.
See Also: Alibaba's Tax Rate To More Than Double Amid Chinese Regulatory Crackdown: Report
Michael Norris, an analyst with Shanghai-based AgencyChina said the news might impact future talent recruitment.
“This incident may dissuade promising female graduates and highly-qualified female managers from joining Alibaba,” reported Bloomberg.
The Jack Ma-led company will work with the police in their investigation, as per the report.
Alibaba has been under the scanner of Chinese authorities since November when its subsidiary Ant Group was forced to suspend its IPO.
In 2018, rival JD.com Inc JD CEO Liu Qiangdong, also known as Richard Liu, was briefly arrested in the United States on suspicion of rape.
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