Huawei pushes back on reports of government ties, claims employee ownership

Huawei’s controversial status in North America and Europe stems from a lot of different factors. At the heart of most of them, however, is the hardware maker’s alleged ties to the Chinese government. The notion of government control has been enough to cause something approaching an outright ban on its products in the States, over worries that handsets and networking equipment could be used to spy on the U.S. government and its citizens.

A recently published report from professors at Fulbright University Vietnam and George Washington University Law School resurfaced those issues. The simply titled “Who Owns Huawei?” attempts to get to the bottom of who is controlling the rapidly ascending smartphone maker. The results published struggle to draw a clear conclusion on the matter, though the authors note in the summary, “Regardless of who, in a practical sense, owns and controls Huawei, it is clear that the employees do not.”

Huawei held a press call this week in an attempt to clarify some of that confusion, and the results were, well, also pretty confusing. The company provided TechCrunch with a transcript of the remarks by Chief Secretary of its Board of Directors, Jiang Xisheng. Jiang explained that, contrary to reports, Huawei is “wholly owned by its employees.”

The executive is referring to Huawei’s labor union. Under the plan, employees control 99 percent of the company’s “virtual restricted shares.” The executive explains the structure thusly:

In China, a limited liability company can have up to 50 registered shareholders. A non-listed stock corporation can have up to 200 registered shareholders. At Huawei, we have way more than 50 or 200 shareholding employees, so they cannot be registered as Huawei’s shareholders. This is true for Huawei as a limited liability company. Even if we make our company a stock corporation, it would still be impossible to register all our shareholding employees as shareholders. Because of this, the Union acts as a platform through which our employees can hold shares.

Certainly sounds nice, but as The Wall Street Journal notes, founder Ren Zhengfei only has one percent, but makes the key decisions, including who sits on the board and other major moves. “The Trade Union Committee also does not influence the operations of Huawei Holding or Huawei Technologies,” Jiang explains. “The Trade Union Committee is not involved in any of the company’s business operations.”

Jiang says the trade union involves itself with improving the physical and mental well-being of its staff, from helping to pay for medical expenses to organizing a variety of clubs, including basketball and badminton.

The paper, however, dismisses the notion that trade union ownership and government control are mutually exclusive. “Given the public nature of trade unions in China,” its authors write, “if the ownership stake of the trade union committee is genuine, and if the trade union and its committee function as trade unions generally function in China, then Huawei may be deemed effectively state-owned.”

Jiang, for his part, outright rejects the notion of government stake in the company. “Most of what the US government says is not true,” he says. “Regarding this point, we have responded many times. Though it is not under my charge, one thing is for sure – there is no government capital in Huawei. Huawei issued some bonds, many in the capital markets in Hong Kong and in countries outside of China. So far, to my knowledge, we have not issued bonds on the Chinese mainland.”