Friday, April 29, 2011

Huawei CEO's Nepotism Strategy May Prove Fatal

There's been some discussion by Huawei watchers that the patriarch / CEO of the company, Ren Zhengei, has been pressuring Chairwoman Sun Yafang (whom I wrote about last week) to resign (his latest offer is YUAN$1Billion) so that his son Meng Ping, also called "Ren" Ping (see photo) can replace Sun as Chairman of the board. Unfortunately for the company, Sun Yafang is highly regarded both inside Huawei and in the industry in general while Ren's son hasn't been able to gain the respect of the company's employees. In fact, according to my sources, some Huawei employees call him "A dou"; a historical reference to a king's son who's an idiot.

Currently, Huawei's board includes three family members – CEO Ren Zhengfei, CFO Meng Wanzhou (Ren Zhengfei's daughter), and Xu Wenwei (Ren Zhengfei's son-in-law and spouse of Meng Wanzhou).  Ren Shulu (Ren Zhengfei's younger brother) sits on the Board of Supervisors of Huawei. In addition to his brother and his children by Meng, Ren Zhengfei also has three sisters in Huawei.  His son-in-law Xu Wenwei divorced his wife to marry the CEO's daughter Meng Wanzhou. This was a strategic move by Xu to fortify his position in the company and enter Ren Zhengfei’s inner circle.  Xu is someone to watch because he's responsible for Huawei’s research and has a reputation for being quite competent.

Ren Zhengfei's preference for installing family members in high level company positions regardless of merit is understandable considering that he got his start by marrying Meng Jun, the daughter of the Deputy Governor of Sichuan Province Meng Dongbuo.  Besides being ambitious, he’s said to be a womanizer, especially favoring company secretaries.  His wife divorced him, and he married one of the secretaries, with whom he has a daughter.  Then he divorced again and married another company secretary.

Professor Chen Shengjun said, “If you put Mr. Ren Zhengfei and Mrs. Sun Yafang together, all Huawei employees think Mr. Ren Zhengfei is the Number one boss despite Mrs. Sun Yafang’s position as Chairman. Mr. Ren Zhengfei tried a lot to choose his successor from professional managers but failed. From Mr. Ren Zhengfei’s aspect, he probably has to leave Huawei to his children in consideration of the backwardness of China professional manager market especially lack of loyalty. Huawei probably has to become a family enterprise although this is a danger for Huawei.”

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