Jiang Xisheng’s Online Interview with the BBC

March 29, 2021

Gordon Corera, Security Correspondent, the BBC: Thank you very much for seeing me. I appreciate your time. I hope I can just ask you a few questions if that's okay. You joined very early on in the company's life. I'm very curious to understand what it was like when you joined, how big it was, and where it was.

Jiang Xisheng: I joined Huawei in 1989. Huawei was founded in 1987, so when I joined the company it was pretty small, around 30 to 40 employees.

Gordon Corera: When did the employee structure really become an idea for the company, that this was the best way to organize it? Was it in those early days or during the 1990s when this emerged? What led to the decision?

Jiang Xisheng: I believe that both these times played a role in this process.

Mr. Ren had already decided on a kind of employee shareholding structure when he was first setting up Huawei. There were two reasons for this. One, the company lacked funds, so this employee shareholding structure provided the capital it needed to develop its business. Two, this structure helped the company attract and retain talent.

By the 1990s, an increasing number of Chinese companies started to implement an employee shareholding scheme. This made Huawei's employee shareholding structure, including its ultimate purpose, more clear.

The country was also standardizing laws and regulations on employee shareholding. In the late 1990s and early 2000s, both the Shenzhen municipal government and national authorities began to enact laws and regulations to guide and support the implementation of employee shareholding schemes.

Gordon Corera: I'm curious, in the early days, was it that hard to generate the capital? Was it important that it actually needed to come from people working for the company to be able to raise that and get that going? I mean: Did you feel like an investor in the company then, when you started, as well as an employee?

Jiang Xisheng: Yeah, it was something like that. In the early days, the company had to offer decent pay and bonuses to our employees to attract talent while striving to maintain growth momentum. So this scheme allowed for the bonuses distributed to our employees to ultimately be fed back into the company when they purchased the shares. For me, I felt that I earned some money, but I didn't have much cash at hand, because I had invested it back into the company. I felt like I was also an owner of the company, as the business development, revenue, and profits of the company every year held great significance to me.

Gordon Corera: Are many people from the early days still there? Are you one of the only people along with the founder or is there a group of you who were there at the beginning and are still part of the company?

Jiang Xisheng: Not many of the employees who joined before me are still with the company today, but there are a few. There are many people who joined the company around the same time I did and are still working here today. Guo Ping, one of our rotating chairs, joined the company the same year as me.

Gordon Corera: And then the current model of employee ownership that operates, when did that come about, with the Union and the Representatives? It sounds like that arrived in the last 10 years or so.

Jiang Xisheng: It wasn't in the last 10 years. We started organizing employee shareholding through the Union over 20 years ago, around the year 2000. This change was prompted by changes to national laws at the time.

I remember that China issued the Company Law around 1993 or 1994, which allowed employees to hold shares through employee shareholding committees. Those are a kind of entity registered with the Civil Affairs Bureau. However, by 2000, the bureau decided it no longer wanted to use this system.

After that, Shenzhen's municipal government and some other local governments enacted rules that allowed trade unions to be used as a platform for implementing the employee shareholding scheme. So Huawei adjusted its scheme in accordance with these latest laws and regulations. We have been using the Union to implement this mechanism since around 2000.

Gordon Corera: I suppose the question people will want me to ask is, how much power does the Representative Commission, those 115 people, really have over the Executive Board? How far can they actually hold them to account or tell them what to do? Is it really more consultative, or do they have some ability to actually change the strategy, or remove individuals if they were unhappy with something?

Jiang Xisheng: This is a good question. It's about the separation of corporate governance power between the different governance bodies. At Huawei, the Representatives' Commission is the highest authoritative body that exercises shareholders' rights. So first, the Representatives' Commission is responsible for electing members to the Board of Directors (BOD) and to the BOD's Executive Committee.

Second, the Commission convenes at least once or twice a year to decide on major matters that concern shareholding employees.

Third, the BOD reports on how well they have fulfilled the authority granted to them and the role they've played over the previous year, as well as the current state of the company, to the Commission. The Commission assesses this report, and approves it or rejects it if the Commission believes it's not good enough. The Commission has typically approved these reports.

The Commission (including its members) doesn't intervene in the day-to-day operations of the BOD or BOD Executive Committee. If they want to share their opinions on the company as individuals, we have another common channel – our Xinsheng Community website. This is a digital bulletin board where any employee can share an opinion about any corporate body or any other employee, be they managers or members of the BOD Executive Committee. Every Huawei employee can install and use the Xinsheng Community app. It has an Internal Business section, where everyone can post their opinions on any corporate business, department, or manager.

Gordon Corera: Given these positions, you must have to be careful what you put on there. If you post a comment from someone who's as senior as yourself, it might be interesting. Can you write comments yourself?

Jiang Xisheng: Yeah, sure. Just before our meeting, I was reading some posts and found one criticizing me. There was actually a lot of criticism in it. There were over 70 replies to this post. Half of them were agreeing, while the other half were people defending me. This is pretty common within Huawei. The company also has a Supervisory Board to oversee members of the BOD and its Executive Committee. Routine oversight is critical for this specialist organization.

Gordon Corera: Just a few more quick questions. In the video, it said Mr. Ren, the founder, has a veto over certain matters. What would those be? What kind of areas has he vetoed or does he need to veto?

Jiang Xisheng: Mr. Ren may exercise his veto right on major company matters, such as capital structure, capital increase, eligibility of candidates for the BOD and Supervisory Board, and the governance mechanisms of the company. We designed this veto right based upon the UK monarchy. It's actually more like a deterrent and constraint for members of the BOD and its Executive Committee. The right is not frequently used, and may never be used again. It's more of a constraint and deterrent.

Gordon Corera: And when it comes to the people being elected as Representatives, the 115, are those elections very competitive? Do people compete against each other? Do they campaign like in an election for President of the United States? Do they go out there and try to persuade their colleagues and say "vote for me and I will offer this and I will be this kind of person"? Is that how an election takes place for these positions?

Jiang Xisheng: It is definitely not as competitive as the US presidential election. However, there is a strict process that all candidates must go through.

During the election, our company is divided into different sectors. Huawei has a huge number of employees, so it is rare that employees know many people from other departments. Candidates need to first be nominated within their own sectors. In order to be nominated, they must deliver presentations and introduce themselves.

Before being accepted as a candidate, employees have to pass a panel assessment, which is recorded as a video and then posted on the internal website. Other employees can watch these videos and then share their comments or views about that candidate. In addition, the number of candidates is larger than the number of Representatives to be elected, so not all candidates can become Representatives. There is some competition, but it is certainly not as fierce as the US presidential election.

Gordon Corera: Obviously, the criticism you hear in other countries is that people do not understand this ownership structure. It is very difficult for them to grasp what it means. They think that it somehow allows the Chinese state to exercise influence through the company. How do you respond to the criticism that this ownership structure is not actually a real mechanism of power or control but simply a way that the Communist Party or some other organization can control the company?

Jiang Xisheng: It's true that few companies in the world that are as big as Huawei adopt the employee shareholding scheme. In China, many companies use this scheme, but Huawei is the only large company that is 100% owned by its employees. In the US there are one or two examples, and one example in the UK is John Lewis.

It is indeed a unique scheme. All of Huawei's shareholders are its employees, who also exercise shareholders' rights. This means that the interests of those employees are closely tied to those of the company. That's why shareholding employees closely oversee the company, and why they care so deeply about the company's operations and how rights are exercised within the company.

So it's safe to say that the oversight of Huawei by tens of thousands of employees is the best and most effective type for the company.

Within Huawei's governance mechanism, we have bodies responsible for making decisions, overseeing the company's operations, and executing decisions. In addition, we have a huge number of shareholding employees who oversee company operations, and they will not allow external interference in the company's operations.

Most Huawei employees are either experts or professionals, and they have a deep understanding of the company's development, management, and strategies. They all agree that Huawei would not benefit from external forces intervening in the company's operations. That's why Huawei has always operated independently, and will continue to do so.

Gordon Corera: By that you suggest that if the state or someone else told you to do something which the company was unhappy with, then the Representatives and the founder would have the desire or the ability to say no?

Jiang Xisheng: Yes. There is no law in China that allows the Chinese government to intervene in Huawei's operations or tell Huawei what to do. Even if government officials tried to intervene in our company's operations, we would have the right to say no to them.

However, in terms of industry policy, related government agencies may provide recommendations regarding the sectors or directions we should prioritize. For example, in the early 2000s, a phone system called the personal handy-phone system or PHS was booming in China, so China's Ministry of Information Industry suggested that communications vendors invest more into this system. However, this was only a recommendation, not an order that every company had to follow. Back then, Huawei didn't believe that PHS had a promising future, so we did not choose to invest heavily in this system.

Gordon Corera: Thank you! I think I've asked all the questions I want to ask. Is there anything you want to add or any other points you want to make, sir?

Jiang Xisheng: I would like to share the three major factors that have contributed to Huawei's growth and development over the years.

First, Huawei's growth has benefited from the open market in China. When China first opened up its market, there were eight vendors from seven different countries in the telecoms sector. That environment helped Huawei grow rapidly in the China market. Huawei then expanded outside China, where it benefited from the open overseas market.

Second, our ownership and governance structures enable us to make long-term R&D investment, which ensures that we provide advanced products and superior services to our customers.

Third, we are truly customer-centric. This is really important. Huawei is not centered on the interests of shareholders or employees. Instead, everything we do is focused on our customers. We have been doing this over the years. Everyone, from Mr. Ren to our lower-level employees, strictly adheres to this principle. This has made Huawei what it is today.

Gordon Corera: Thank you very much for talking to me. It's been very interesting, especially hearing from someone who has been with the company for so long. It must have changed a lot.

Jiang Xisheng: Thank you! We invite you to visit us in China, and specifically in Shenzhen, when you can.