LAUREN CHEN WRITES – A co-founder of Chinese Internet giant Alibaba took to the blogosphere September 26 to criticize Hong Kong regulators. His complaint? The region’s market regulations are too restricting for the biggest IPO since Facebook.

At issue are complex rules about the corporate ownership structure of a firm that wants to go public on the Hong Kong Stock Exchange (SEHK). Much of it boils down to who gets to choose the firm’s board of directors — individual shareholders, or a ‘wise-men’ group of 28 partners involved in Alibaba’s management. Yahoo owns 23% of Alibaba’s website Taobao.com, ranked 13th most popular website according to web information company Alexa.

Co-founder Joseph Tsai’s is apparently all too willing to violate shareholder rights and disregard the tradition of “one share, one vote.” The second billionaire founder of the Chinese e-commerce powerhouse wants a self-selecting body to nominate more than half the board. Supporters call this communistic style of governance a safeguard to “Alibaba’s special culture,” devoted to preserving the company’s success.

But long-time shareholder rights activist David Webb says that it’s hubris. “Mr. Tsai tells the world that this ‘innovation’ in corporate governance is to ‘protect the long-term interests of… all shareholders’,” he writes in a scathing rant on his site, Webb-site.com. “This, of course, is because management knows what is best for shareholders, and shareholders don’t. If this has a familiar ring to it, then the back of your mind is making the analogy with the Party and the people of China.”

The irony lies in an e-commerce firm with a mission to help “the small guy” do business anywhere and a proposal that reduces a small shareholder’s power. Alibaba wants public valuation of the firm, yet wants to retain control through super voting rights.

If Hong Kong doesn’t bend the rules and Alibaba doesn’t get its way it will likely list its IPO shares in New York instead. This move might pressure Twitter’s public listing, since Alibaba is the next elephant IPO; it can sit wherever it wants.