A paper on Huawei’s ownership structure recently posted by Christopher Balding and me has elicited a response from Huawei and other critics. Huawei’s statement and my response are below.
Huawei’s statement:
This report, released by Professor Christopher Balding and Professor Donald Clarke, was based on unreliable sources and speculations, without an understanding of all the facts. They have not verified the information in the report with Huawei, and their conclusions are completely unsubstantiated. Huawei is a private company wholly owned by its employees. No government agency or outside organization holds shares in Huawei or has any control over Huawei.
Through the Union of Huawei Investment & Holding Co., Ltd, Huawei implements an Employee Shareholding Scheme that complies with applicable laws and regulations. The Representatives’ Commission is the organization through which the Union fulfills shareholder responsibilities and exercises shareholder rights. As Huawei’s highest decision-making body, the Representatives’ Commission elects members of the Board of Directors and the Supervisory Board.
In addition, the Commission makes decisions on important company matters, like capital increases, issuance of new shares, and profit distribution. Members of the Representatives’ Commission are elected by shareholding employees that have the right to vote. Daily operations of the Representatives’ Commission, Board of Directors, and Supervisory Board, including the selection of their members, comply with Huawei’s Articles of Governance.
They do not report to any government agency or political party, nor are they required to do so. We welcome experts and researchers who have an interest in this topic to visit Huawei’s exhibition hall of shares and exchange their thoughts and ideas.
My response:
Like some of the other critical responses, the Huawei statement fails to identify any facts we got wrong. It does not identify any of the sources it believes are unreliable or wrong, or from which we drew the wrong conclusions. It complains that we did not verify the information with Huawei, but it doesn’t identify any specific thing we got wrong as a result. If Huawei is unwilling to tell me, it is not for me to guess which sources Huawei finds unreliable and then to defend their reliability, but I wonder whether they include State Administration of Industry and Commerce records, compiled with information supplied by Huawei, within that anathema. The only way to respond to this kind of critique is just to point back to our paper and say, “Tell me where you see a problem.” But that is precisely what the critics seem unwilling to do.
There being no specific criticisms to respond to, here is a response at a more abstract level.
Given that Huawei does not dispute any of the underlying facts, it seems that the only dispute is one about words: do the undisputed underlying facts about Huawei’s share ownership structure and virtual share system constitute something that can reasonably be called “employee ownership”? We don’t control the English language, and if Huawei wants to call it that they can. We don’t feel the system amounts to something we would call “employee ownership,” and we say so. But the main point of the paper is just to set forth the underlying facts. We include in the paper Huawei’s description of its Representatives’ Committee and what it does. We see our contribution as laying out in English the underlying facts, with citations to sources that allow anyone to retrace our steps and judge for themselves the reliability and appropriateness of the sources. Our bottom-line conclusion about what it all means is just our opinion. If readers disagree with our conception of what employee ownership means and prefer Huawei’s, that’s their opinion. As long as everyone understands what the structure is, what label one puts on it is not ultimately that important.
Some people have raised the issue of the purported share register at Huawei’s headquarters in Shenzhen. We don’t deny that there are paper books with records of something. Nor do we claim that the records are simply made up from nothing. But the question is, records of what? A name with some numbers beside it is not proof that the named person is an actual shareholder, especially given the fact that corporate records show who the actual shareholders are. Very possibly the paper books record the holdings of virtual shares under Huawei’s profit-sharing scheme.
While I’m gratified that so many people have found the paper interesting and useful, I’m also surprised. I want to stress that we don’t say anything new in the paper. We don’t discover new facts, and we don’t offer new interpretations. There’s nothing we say that hasn’t been said many times before in the Chinese media, and we cite a number of such reports, in addition to court cases in which the courts talk about Huawei-issued documents they have seen that discuss “virtual shares”. Huawei’s quarrel is apparently not just with us, but with the Chinese media, State Administration of Industry and Commerce records (themselves derived, to the best of my knowledge, from information submitted by the Huawei entities), and the court system.
Finally, I wonder if any of the earlier Chinese media reports making the identical points elicited a similar angry official statement from Huawei in response. If not, why not? Does Huawei object only to an English-language report?
Don: I think you know why Huawei objects so strongly to this English-language report, for which I congratulate you and Christopher. Huawei is fighting on multiple fronts what it views as a life-and-death struggle for markets in OECD countries where there seems to emerging a (excuse the expression) “united front” to keep Huawei out. The basis for this determination is the perceived domination of Huawei and every other PRC company by the Communist Party and their alignment with China’s geostrategic aims. Easily accessible commentary in English by knowledgeable foreign China experts which undermines the false narrative that Huawei is simply like every other private business corporation owned by its shareholders may defeat or hinder Huawei’s global ambition.