Huawei CEO's Message Presages Management Transition

(Reuters) - Huawei Technologies Co Ltd, a $30 billion Chinese telecoms gear maker, has initiated a system this year to allow top executives to take turns acting as chief executive, its founder and CEO Ren Zhengfei said in a year-end message.

The rotating CEO system is apparently aimed at paving the way for a smooth management handover from 67-year-old Ren, although it is unclear when Ren intends to retire, analysts said.

Huawei is entering a post-Ren era, said Ji Yongqing, author of a book titled, Huawei's World.

Huawei hopes to realize a smooth and steady power handover from its founder and first-generation leaders to the second generation, Ji told Reuters.

Huawei, built from scratch by media-shy Ren in 1987 into the world's No.2 telecommunications equipment maker, has never made public its management succession plan. The company is jointly owned by its employees and is not listed.

The rotating system is better than sole reliance on a single person for the success of the company, Ren wrote in a year-end message to its 130,000 employees that has also been posted on major Chinese news websites.

The new structure requires a number of top Huawei executives, including vice chairman Guo Ping and several executive directors of its board, to act as chief executive for six months at a time, according to the article by Ren and a source close to Huawei.

Ren, who revealed in the message that he twice underwent cancer surgery a few years ago, hopes the new system will help strengthen corporate governance as Huawei seeks to grow globally, analysts and the source said.

The company is gearing up for further expansion. Under such circumstances, corporate governance has become extremely important, said the source, who asked not to be identified because he was not authorized to speak to the media. That's why Mr. Ren adopted such a management system.

Ren remains the ultimate leader of Huawei, although he is no longer in charge of its day-to-day operations on issues such as marketing, research and development, and technology, the source said.

Actually Mr Ren has been away from specific business management for quite a few years. He will only get involved when there is big decision to be made, he said.

A Huawei spokesman was not immediately available for comment.

COLLECTIVE LEADERSHIP

Huawei, based in the southern boomtown of Shenzhen, competes with Samsung Electronics Co Ltd and Apple Inc in consumer electronics and with Ericsson and Cisco Systems Inc in telecommunications network gear.

Huawei's sales grew 11 percent to 98.3 billion yuan ($15 billion) in the first half, with the company on track to hit its full-year sales target of 199 billion yuan.

Huawei has been seeking to expand in the U.S. telecom sector, but has run into political opposition over national security concerns.

Ren's background with the Chinese military has often been cited as hindering the company's progress in North America, although Huawei has repeatedly denied it has links with the armed forces.

The rotating CEO system replaced the Executive Management Team that Huawei initiated in 2004, under which eight company executives took turns to take on duties such as drafting documents and other day-to-day operations, Ren said.

The new system provides much more authority to the acting chief executives, making them the company's virtual CEO during their tenures, according to Ren and the source.

The acting CEOs pay more attention to the company's strategy ... and delegate more day-to-day decision-making authority to the company's various business groups in different regions, Ren said.

In a message titled A River of Spring Water Flowing Eastwards -- a line from a famous ancient Chinese poem -- Ren attributed Huawei's success largely to the solidarity of its management and teamwork.

Ren said he chose to adopt a relatively low public profile not because he thinks highly of himself but because he thinks the company's success is based on collective leadership.

He expressed concern about the global economic outlook and its potential impact on the company.

The economy is becoming more and more beyond control. If the financial crisis deteriorates further ... can we remain intact? Are we capable of saving ourselves? Ren wrote.