Telecoms

A son always rises

Huawei is starting to look like a family business

Proud dad: Ren Zhengfei

“I’ve seen some people really crater under the pressure and the long shadow,” Ivanka Trump, the daughter of property developer Donald Trump, recently told the Financial Times, as she spoke about the difficulties of following in a successful parent’s footsteps. “[They] are either trying to distance themselves from the parents so much that instead of using the advantages at their disposal, they become unproductive, or they get totally paralysed and do nothing because of fear of failure.”

Ren Ping is going to experience first hand what it’s like to live under a long shadow.

Last week Ren made headline news after he was appointed to the board of directors and executive team of Huawei, the network equipment maker founded by his father Ren Zhengfei, 66, in 1988. Company sources later confirmed that Ren senior has also appointed his daughter Meng Wanzhou to serve as Huawei’s chief financial officer.

They’re joining a big business. Huawei is now the world’s second-largest telecom equipment supplier behind Ericsson of Sweden. With Chinese government backing, it has sewn up major deals in Asia, Africa and Latin America. The Shenzhen-based company has also won contracts in Europe. Norway’s Telenor, for instance, chose Huawei over Ericsson to build a new 4G, or fourth generation, wireless network last November (see WiC38).

But Ren’s decision to promote his children has led to unhappiness among some of his most senior executives. Xu Zhiping, president of Huawei’s products and solutions staff, is one of a number of disaffected senior staff to resign. Sun Yafang, the company’s number two, has also threatened to leave, says Century Weekly. Sun is known as Ren’s most important collaborator in transforming Huawei from a seller of telecom equipment door-to-door into the technology giant it has become today. Analysts say her departure would have a big impact on company operations.

The new succession plan again raises questions about Huawei’s opaque management structure.

Although the company insists that it is wholly-owned by its 60,000 employees, with Ren holding only 1.42% of the company’s stock, the bulk of Huawei’s shareholders cannot execute rights as bona fide shareholders, says Century Weekly. In fact, it reports that few employees know anything about their shareholdings. Nor can executive team members override Ren’s authority. He remains at the core of all decisionmaking in Huawei.

Transparency, it seems, won’t be getting much of a mention in the Huawei mission statement. The company’s annual report says nine directors currently serve on the board. But their names have not been disclosed and before news of the latest shakeup leaked, the public knew little about the company’s leadership circle.

Press interest in events is understandable. Huawei can lay claim to being China’s first truly homegrown multinational. Many say its spectacular rise will serve as a model for other Chinese companies seeking to compete internationally. Get the management succession wrong, warns China Business Times, and one of the country’s most successful private enterprises could take a hit.

The irony is that overseas critics are less concerned about family politics than by military ones.

There has long been a suspicion that the company has close ties to the People’s Liberation Army (Ren’s background as a former officer is well-known) and that this might pose a security threat to communications infrastructure supported by Huawei products.

This week the US-China Economic and Security Review Commission, a bipartisan commission set up by the US Congress, concluded that the company will continue to require greater scrutiny by government officials.

“A good portion of the [cyber] incursions happen over our telecom infrastructure,” says Michael Wessel, a member on the advisory panel. “Until the Chinese can prove otherwise, it’s important to go in with a sceptical eye.”

No doubt many of Ren’s departing management team will have more of a sceptical eye now too…

Keeping track: In November, WiC reported that several of Huawei’s top executives had stepped down. Chinese media were speculating it was because the boss Ren Zhengfei wanted his son, Ren Ping, to eventually get the top job, and planned to appoint his daughter, Meng Wanzhou, currently a senior finance manager, as Huawei’s chief financial officer. Analysts accused Ren of turning the company into a family business. 21CN Business Herald reported this week that the telecoms equipment maker has started conducting interviews to replace departed execs. And to quell rumours about turning Huawei into a family business, Ren Zhengfei made an internal speech stating that the company promotes talents based on “merit”, not “cronyism”. Further scotching rumours that Ren Ping would get his job, long-time Huawei executive Sun Yafang – who is credited with Ren Zhengfei as key to the firm’s success – was also reappointed by the board as president. (21 January 2011)

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