Gong Dou of Lunan Pharmaceutical Co., Ltd: Chairman and company elders compete for control

 Gong Dou of Lunan Pharmaceutical Co., Ltd: Chairman and company elders compete for control

The struggle between Zhang Guimin, chairman of Lunan Pharmaceutical Group Co., Ltd., deputy of Shandong Provincial Peoples Congress, and the companys elders has become intense.

On March 2 last year, four of the five board members (Zhang Zeping, Li Guanzhong, Wang Buqiang and Zhang Lixing) demanded the removal of the chairman. Zhang Guimin, chairman of the board of directors, dismissed four people from administrative positions. On Dec. 10, 2018, the three elders (Zhang Zeping, Li Guanzhong and Wang Buqiang) held an interim meeting of the board of directors on the plight of South Shandong Pharmaceutical Co., Ltd. with the participation of social shareholders. They asked the heads of the company and its subsidiaries to present their plans and accountability measures to the board of directors before the end of the year. To request the government to guide and urge the implementation of the resolutions and resume the normal operation of the company.

On December 16, journalists from the New Beijing News contacted Zhang Guimin several times without success. Late in the night of December 18, the reporter contacted Zhang Guimin through Zhao Long (daughter of Zhao Zhiquan, former chairman of Lunan Pharmaceutical Company) in the United States, and he continued to refuse. On the evening of December 19, Zhang Guimin responded to a reporter from the Beijing News that after he took over the business, the business had many difficulties. No detailed explanation was given.

At present, the infighting over the control of Lunan Pharmaceutical Company continues.

Red Flag Road extends to the entrance of Lunan Pharmaceutical Office. At the first left intersection, the red light reflects a billboard more than five meters high on the Yellow courtyard wall. On the billboard, the red ballet lady is embellished with the slogan Lose fat, lose weight, get home healthy. The advertisement, called Shuerjia, is aimed at a chain pharmacy of another local pharmaceutical company.

The advertisement of diet drugs is a microcosm of the promotion of Lunan Pharmaceutical in Linyi. In the broader region, high-speed railway stations, airports, highways, where crowds are surging, and on state television, Lunan Pharmaceutical has invested nearly 100 million yuan in advertising for Shuerjia.

These huge advertising investment is not directly proportional to sales. Before the advertising investment, the revenue exceeded 100 million yuan. There are only tens of millions now. Li Guanzhong, director of Lunan Pharmaceutical Co., Ltd., told the Beijing News that Zhang Guimin, chairman of Lunan Pharmaceutical Co., Ltd., did not listen to the boards suggestions, nor did he cooperate with advertisements to do a good job in marketing measures, and the products were unsalable. Li Guanzhong proposed that Zhang Guimin hold a board discussion, but it has been invalid.

At the very least, we should always conduct discussions and get the approval of the board of directors. Director Zhang Zeping believes that the board of directors has a lot of criticism to the chairman of the company on major matters.

Fighting does not start here alone. According to Lunan Pharmaceutical executives disclosed that earlier, Lunan Pharmaceutical, a calcium tablet named rosuvastatin infrastructure bidding. The total investment budget of the project is over 70 million yuan, with five construction companies participating in the bidding. Members of the board of directors consider it necessary to set up a special tender committee for review to ensure quality and to invite bids through competitive bidding.

To Li Guanzhongs surprise, this project is the highest bidder. After the confirmation of the tender, the board of directors did not know.

Among the board members, Zhang Zeping, Li Guanzhong, Wang Buqiang and Zhang Lixing are the elders of South Shandong Pharmaceutical Industry. They followed Zhao Zhiquan, the former chairman, and watched Lunan Pharmaceutical come to this day.

Li Guanzhong asked Chen 11 (a pseudonym) of the Ministry of Infrastructure for information. Chen 11 explained that he was only responsible for Zhang Guimin.

The company basically does not hold a board of directors, except at the end of the year. Zhang Zeping said. In August 2016, Lunan Pharmaceutical held an expanded executive retreat meeting. Zhang Zeping proposed that one general managers office meeting should be held in January and one board of directors should be held in four months. Zhang Guimin agreed.

Not only does the chairman not hold the meeting on schedule, but he still does not hold the board of directors when he meets with important matters. In the eyes of the above-mentioned elders, General Zhao (Zhao Zhiquan) is very popular, but he communicates beforehand and listens to opinions, and after Zhang Guimin was promoted to the chairman, the board of directors of Lunan Pharmaceutical Company survives in name.

The crisis emerged three years after Zhao Zhiquans death. After March 2017, the competition for control of Lunan Pharmaceutical became more and more fierce. Zhao Zhiquans daughter, Zhao Long, told the Beijing News that they (Zhang Guimin and the three elders) were usurping the control and ownership of Lunan Pharmaceutical Company.

Accidental Chairman

The red giant celebrating the 50th anniversary of the founding of Lunan Pharmaceutical Factory is very conspicuous. This time, Lunan Pharmaceutical Co. celebrated the 40th anniversary of reform and opening up. It may be a propaganda strategy. In the eyes of employees, Zhang Guimins Lunan Pharmaceutical Company is going to Zhao Zhiquan. Prior to that, Lunan Pharmaceutical commemorated the factorys anniversary with the date of October 25 restructuring. This day is the rebirth of Lunan Pharmaceutical Co., Ltd. Zhao Zhiquan attaches great importance to it.

Lunan Pharmaceutical Co., Ltd. is the proud pen of Zhao Zhiquan, a model of the times. Thirty-one years ago, Zhao Zhiquan restructured a school-run factory that was on the verge of bankruptcy and built it into a pharmaceutical factory in southern Shandong. By 2014, Lunan Pharmaceutical Profit Tax will be about 1 billion yuan, becoming a star enterprise of private enterprises.

Zhang Ze, the elder who fought with him, was born in 1960, one year younger than Li Guanzhong and four years stronger than Wang Bu. The three men followed Zhao Zhiquan from the day of restructuring. They are the power center of Shannan Pharmaceutical Co., Ltd. and the elder who followed Zhao Zhiquan through the rough road.

However, the chairmans position is somebody elses.

Wang Buqiang said that after Zhao Zhiquans death, Zhaos secretary handed over two identical wills to Wang Buqiang and Zhao Long respectively. The document proposes that Zhang Guimin hold the post of chairman and general manager. As for why Zhang Guimin took over, even Zhang Guimin himself did not know. Zhao Long also asked why Li Guanzhong was him.

Zhao Zhiquan is the soul of Lunan Pharmaceutical, and has a high prestige in the enterprise. Given Zhaos overall contribution and authority, we believe that his choice has been carefully considered. Wang Buqiang said. They speculate that one possibility is that Zhang Guimin is young and highly educated.

Li Guanzhong introduced that in 1993, Zhang Guimin graduated from Fuzhou University and entered the factory. He entered the laboratory from the workshop and was promoted to deputy general manager from a pilot test (head of class, director, Minister of scientific research). At that time, Zhang Guimin led a research team of 1,000 people, mostly with masters degree or above.

In November 2014, the board of directors appointed Zhang Guimin as chairman and general manager of Lunan Pharmaceutical Co., Ltd. through Zhao Zhiquans will proposal. Two years after Zhao Zhiquans death, this harmonious scene gradually broke down. The elders believed that some of Zhang Guimins decisions did not follow the procedure and report to the board of directors.

Zhao Longs statement to reporters shows that in March 2017, Zhao Long issued a statement requesting the convening of an interim shareholdersmeeting. Zhang Guimin has not fulfilled the directorsmany proposals to hold board meetings.

Outbreak of conflict

On March 2, 2017, four directors proposed to hold an interim board meeting to discuss the appointment and removal of Zhang Guimin as chairman.

After receiving the notification, Zhang Guimin shall perform his duty of issuing a notification of the convening of a meeting within five days. Three elders said that on March 7, Zhang Guimin did not give notice, but in the name of the company, he dismissed four directors from the post of deputy general manager and Wang Buqiang from the post of chief accountant.

When the board of directors broke down, there was no way for Zhao Long to apply for the shareholdersmeeting. Zhao Long regards herself as a major shareholder in Lunan Pharmaceutical Co., Ltd. and her dispute with foreign-funded shares in Lunan Pharmaceutical Co., Ltd. is being heard separately.

Recently, Zhao Long was anxious to finish a private job in the United States. She answered Xinjing Daily reporter by instant messaging on the evening of 16th: At that time, I opposed the removal of the chairman without the shareholdersmeeting for the first time. Of course, Zhang Guimin used violent means to expel the seniors, and I disapproved of it.

On March 11, 2017, Zhang Guimin failed to fulfill his duty of convening an interim meeting of the board of directors. The three directors elected Wang Buqiang as their representative. On March 12, Lunan Pharmaceutical convened a board meeting to remove Zhang Guimin as chairman, legal representative and general manager. Zhang Zeping was elected chairman and legal representative, and Wang Buqiang was appointed general manager. Zhang Guimin himself was informed of the outcome of the meeting.

According to the Regulations of Lunan Pharmaceutical Company, the dismissal of deputy general manager and general accountant belongs to the functions and powers of the board of directors. The board of directors should make a resolution, and the dismissal without the boards resolution is invalid. More than one third of the directors have the right to propose an interim resolution of the board of directors.

After the meeting, the Lunan Pharmaceutical Supervisory Board officially declared that the resolution of the board of directors on March 12, 2017 is invalid. According to the Company Law and the articles of association, the board of supervisors has no right to determine whether the boards resolution is valid or not.

In order to exercise the rights of the board of directors, on March 18, 2017, under the convening and chairing of Zhang Zeping, Lunan Pharmaceutical once again convened an interim meeting of the board of directors. The meeting urged Zhang Guimin to implement the resolutions of the board of directors, transfer the management authority of the company and restore the order of the companys operation and management.

In March 2017, another shareholder filed a lawsuit in Lanshan District Court, demanding the cancellation of board resolutions issued on March 12 and 18, 2017. A month later, the three directors filed a lawsuit with Lanshan District Court for Zhang Guimins dismissal from the post of deputy general manager and chief accountant. They asked the court to confirm that the decision to dismiss Zhang Guimin from his post was not valid.

At this point, the two sides began to prepare for court. But there has been no formal hearing in the courts.

A middle-level manager of Lunan Pharmaceutical told the Beijing News: I have worked in the enterprise for 20 years, and now Im afraid of losing my job by saying something. What she said was that in the companys eyes, she was opposed to the companys existing decision-making discussions and communication with the board of directors. Three middle-level managers from different positions introduced that in May 2018, Lunan Pharmaceutical signed an agreement with middle-level and above managers of the company. According to the agreement obtained by the reporter, the company has the right to inquire about the voice calls and short message records of the (employees telephone) number when necessary and requests to state and explain the contents of the telephone.

Accept or dismiss. According to the above employees. Zhang Guimin still refuses to return to the factory. Zhang Zeping said.

Drug dilemma

In 2018, in the pharmaceutical industry, the national pharmaceutical reform began to implement consistency evaluation. Consistency refers to the consistency of quality and efficacy of all generic drugs as the original drug. This is the threshold to ensure the quality of drugs. After passing this threshold, the hospital terminal carries on the low price bidding. At present, four municipalities directly under the Central Government and seven provincial capitals are experimenting with purchasing in quantity. Only through consistency evaluation can we win the bid quantity procurement. Not if you cant get through to the hospital in vain. A senior executive of Lunan Pharmaceutical said.

The drugs produced by Shannan Pharmaceutical Company are all prescription drugs. That is to say, its products must enter the hospital before they can live. Lunan Pharmaceutical has more than 8 billion sales and more than 10 products with more than 100 million sales. Li Guanzhong told Xinjing News. The Tegio market share of Lunan Pharmaceutical Company is the largest, but the one-time evaluation of Lunan Pharmaceutical Company is slow. Rosuvastatin calcium tablets are also an important variety of Lunan Pharmaceutical, with a high market share. However, Lunan Pharmaceutical did not pass the consistency evaluation, which led to Lunan Pharmaceutical was not eligible to participate in the national pilot procurement with volume. Several middle-level managers of Lunan Pharmaceutical confirmed the above-mentioned Li Guanzhongs statement.

Wang Hua, a pseudonym for sales, said that Zhang Guimin negatively responded to consistency evaluations. He quoted Zhang Guimin as saying, To make consistent evaluation is to seek death, not to do it is to wait for death. Anyway, sooner or later, its death.

Although the consistency evaluation is not perfect, compared with the current cost-effectiveness ratio of drugs is about 40%, the sales of substitute money is prevalent. Commercial bribery exists in sales with gold. Heavy-priced medicines come out frequently. Consistency evaluation is a strategy to change this way. Wang Buqiang believes that consistency evaluation can reduce the cost of sales, and bring money into the band, which is conducive to the pharmaceutical reform. From the point of view of peoples livelihood, it is beneficial, but it is also a challenge for pharmaceutical enterprises.

Drug sales with gold is a criticism for many years. Drug manufacturers use a sales promotion method to stimulate doctors to use sales products. Generally speaking, it is sales commission. Use illegal cash interests in return for business. Doctors benefit from drug manufacturers when prescribing medicines, and the income of pharmaceutical manufacturers and representatives depends on it.

There are too many potential risks for consistency evaluation in Lunan Pharmaceutical Company. Hengrui, Qilu and Yangtze Rivers have passed a lot, and a variety of South Shandong Pharmaceutical has not passed. The salesman said that the helmsman paid less attention to wait-and-see and treated it negatively. Do not listen to different opinions, pay insufficient attention to the cause.

Now Lunan Pharmaceutical adopts the strategy of sea of people in its sales volume. The sales team increased from more than 1000 to more than 6000 in three years. The gaps in community hospitals, township hospitals and retail clinics have been developed and activated. But the benefits are not as good as before. A persons travel expenses and wages wait for more than 10,000.

To make matters worse, after the Changchun Evergreen Vaccine Incident, an employee reported in real name that Beit Company, a subsidiary of Lunan Pharmaceutical Company, was suspected of illegal co-production. Shandong Food and Drug Administration entrusted Linyi Food and Drug Administration to inspect, and Lunan Pharmaceutical 18 workshop stopped production for one month.

Several middle-level employees of Lunan Pharmaceutical Beit Company confirmed the above news to the Beijing News. In early September, the quality management meeting of the Drug Administration came into the factory. Linyi City Pharmaceutical Supervision Bureau held a safety meeting in the company, and the production of 18 workshops was suspended for more than one month.

The quality management department is directly under the leadership of the general manager, and the quality manager must report to the general manager. Every batch of products must be released with the signature of the quality authorized person, said an executive of Lunan Pharmaceutical. The main person responsible for the matter has been interviewed.

Dissatisfaction of social shareholders

After the struggle, the social shareholder raiser Wang Quan (pseudonym) established the shareholder Weixin group. They believe that the board of directors has been unable to perform its duties properly and is actively defending its rights on its own. Wang Quan told Beijing News that the operation and decision-making of Lunan Pharmaceutical Company violated laws and regulations such as Company Law and Articles of Association, and that the company was operating illegally.

Lunan Pharmaceutical has more than 20,000 social shareholders holding 22 million shares, accounting for 28%. More than 100 social shareholders are united by authorization. These shareholders hold more than 3 million shares, accounting for more than 4% of the shares. Social shareholders communicate with each other through Wechat Group. The shareholders believe that the fundamental cause of the civil strife is the unclear ownership of the company, the arbitrary actions of the relevant personnel for personal interests, which seriously damages the interests of the company, and the fundamental interests of the shareholders can not be guaranteed.

Wang Quan said that Lunan Pharmaceutical could not solve the dilemma by relying solely on the power of shareholders (equity decentralization). He was interviewed by mail by the Beijing News and introduced the whole process.

On August 10, 2018, social shareholders sent an open letter to the Linyi Municipal Committee and the Municipal Government requesting participation and assistance in handling the drug infighting in southern Shandong. Major leaders and representatives of social shareholders held a discussion. On September 7, 2018, the group of social shareholders alliance asked Linyi Municipal Committee and municipal government to participate in and assist in handling the drug incident in southern Shandong. On October 18, social shareholders asked Linyi Municipal Committee and municipal government to trust their own shares.

It is illegal for Lunan Pharmaceutical Company to hold shares of the company, Wang Quan told the Beijing News. The representatives of social shareholders asked the government to supervise and deal with the 16 million shares held by the company in accordance with the law, clarify the ownership structure of the company and the roster of shareholders, and eliminate the phenomenon of illegal and illegal share ownership. They hope to introduce large shareholders through fair and fair transfer, and fundamentally solve the companys legacy problems. To make Lunan Pharmaceutical have the qualification of listing separately and be included in the companys planning and other conditions.

Since the reform of stock system in 1994, Lunan Pharmaceutical Company has become a well-known large-scale pharmaceutical enterprise in China. For more than 20 years, the company has not paid special cash dividends to shareholders. Social shareholders told the Beijing News: Lunan Pharmaceutical should spend 30% of its net profit on cash dividend every year. More importantly, we should hold shareholdersgeneral meeting to elect shareholders representatives to form the board of directors according to law, resolve the lawsuits of the board of directors, eliminate the adverse effects on the company, return the company to the state of legal governance, restore the decision-making power of the board of directors on major matters and investment of the company, and restore the supervisory power of the board of directors to the management, the right of appointment and removal and the right of shareholders to know

The initial major shareholder of Lunan Pharmaceutical Company is state-owned shares. At that time, enterprises were short of funds and state-owned shares were sold to foreign investors. Later, foreign shareholders have been excluding Zhao Zhiquan and fighting constantly. For this reason, the company invests in purchasing and entrusts to hold 25.7% of the foreign-funded shares on its behalf. Wang Buqiang told reporters: There is no big shareholder to be a fixer. The chairman of the board of directors cant be Whoever robs him. He should follow the rules and regulations. Zhao Long has always believed that this part of the equity belongs to her. Zhao Long has sued for the subordination of this part of foreign equity.

The veterans of the board of directors have asked the municipal government and Zhang Guimin for Huilunan Pharmaceutical Co., Ltd. They filed a lawsuit in Lanshan District Court, claiming that the exemption of senior executives is a decision of the board of directors, not the right of the chairman. The Lanshan District Court notified the hearing to be held on May 15. However, a few days before the opening of the court, the director of Zhang Lixing applied to join the lawsuit and postponed the hearing.

Re-convened Provisional Meeting

On December 10, 2018, Lunan Pharmaceutical Board held an interim meeting. Zhang Zeping, Wang Buqiang and Li Guanzhong attended the meeting, and representatives of social shareholders attended.

Ten days ago, the notice said, Lunan Pharmaceutical Reserve Stock (about 1640,05620 shares, subject to statistics) is illegally registered under the name of Zhang Guimin. Lunan Pharmaceutical and its subsidiaries have some problems in the investment of major projects, drug quality management and safety production management, and their decision-making procedures are illegal. In response to consistency evaluation, the main leadership decision-making errors. The board of directors requires the heads of the company and its subsidiaries to present their plans and accountability measures to the board of directors before the end of the year.

The meeting was held in accordance with the Company Law and the Constitution of Lunan Pharmaceutical Group Co., Ltd. and notarized by the Notary Office of Lanshan District. The board of directors calls on the government to guide and urge the implementation of the resolutions and resume the normal operation of the company.

Board meetings do not affect corporate entity decision-making. Zhang Guimin and Zhang Zeping recalled each other and entered the deadlock of legal proceedings. So far, the Lanshan District Court has not tried the lawsuit.

In August, when the government negotiated mediation, Li Guanzhong asked Zhang Guimin in the government office what authority he had to remove the executive appointed by the board of directors. He was silent. But the three elders still can not go back, only the suspended wages were issued.

According to a middle-level employee, consistency evaluation has a great impact, and there will be no market if it is not passed. He hoped that the infighting will end soon. For the sake of enterprise development, dont consume.

A lawyer in Beijing told the Beijing News: The dismissal of deputy general manager and chief accountant should be decided by the board of directors. It is illegal to dismiss without the decision of the board of directors. In addition, more than one third of the board of directors, that is, two or more directors, have the right to propose the convening of an interim meeting of the board of directors. When the chairman receives the request, he shall convene and preside over the interim meeting.

At the interim board meeting held on December 10, 2018, six representatives of social shareholders attended the meeting. They once again put forward the idea of clarifying equity, disposing of self-owned shares in accordance with the law, and eliminating the phenomenon of illegal stock ownership. It is hoped that the municipal government will intervene forcefully to help solve the drug civil strife in southern Shandong.

The pending palace battle continues. For more than a year, no substantive trial has been held.

During this period, the three directors have repeatedly reflected to the governments of Shandong Province, Linyi City and Lanshan District on the problems existing in Lunan Pharmaceutical Industry. Wang Buqiang said that Lunan Pharmaceutical hopes that the government departments can help solve the practical difficulties in order to solve the companys ownership structure. For listing, Lunan Pharmaceutical still has great obstacles.

The intersection with billboards is only three minuteswalk from the Lunan Pharmaceutical Office Building, not far from the family homes of the shareholders. This calm winter, the boards battle continues.

Source: Qian Mingxiao_NBJ10675, responsible editor of Beijing Newspaper