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Huawei’s claim of 100% employee ownership false, may be state-owned: paper (technode.com)
114 points by andrewhbrook on Apr 19, 2019 | hide | past | favorite | 27 comments

For my entire tenure of owning a smartphone before I got my Pixel 2 I was using and would swear by mid range phones from these eastern companies. ZTE, Huawei, LeEco, Alcatel. It was some combination of tendency to break phones, not wanting to support Apple due to their draconian policies, and just being straight up too broke to drop 700 dollars on a phone. These phones would ship without a ton of bloatware (with the exception of LeEco) for around 200 dollars and have decent hardware and alright cameras (outside of low light). For a very long time American phone manufacturers' offerings in this price range would be pretty lacking when compared. These days that's not the case, but in my opinion the inroads they were allowed to make onto the western markets (and subsequently the data they may or may not be collecting and sending to the Chinese Government) is entirely due to the refusal of western companies to ship quality phones at the mid range price.

LG is pretty good too, not expensive, and it is from South Korea.

Huawei says, "Huawei is a private company wholly owned by its employees. Through the Union of Huawei Investment & Holding Co., Ltd., we implement an Employee Shareholding Scheme that involves 96,768 employee shareholders. This scheme is limited to employees. No government agency or outside organization holds shares in Huawei."

How can that be true? When a shareholding employee leaves, including when they are fired for cause, does the former employee get to keep the stock and continue receiving dividends until the they choose to sell the stock to someone else, who may or may not be an employee? If not, then the employees are not actually shareholders, it's just a bonus system.

It's in the article:

> Huawei’s employee ownership claim is untrue because its employees have no control over the trade union’s decisions, the paper says citing China’s Trade Union Law. The employees actually hold “virtual stock” which allows for participation in a profit-sharing scheme, which are canceled when an employee leaves the company and allow no voting rights over the company, it said.

We are just splitting hairs here. In an authoritarian state with no real "rule of law" (yes there are laws but the party is more powerful than the law and power is completely concentrated in the hands of a few, possibly just one), what does it even mean to not be "state controlled"? Everything in China is controllable by the state. China has never had "rule of law". It's always been a very precocious state when it was able to centralize power since the Qin dynasty. Its rulers has never had to divest that power nor implement any sort of real rule of law. Laws in China serve the state, not the other way around (contrast that with Western liberal democracies). This stems from Qin's Legalist origins and every dynasty since then has inherited that basic idea even while they dressed it up with Confucian ethics. I'm not saying if it is right or wrong but I think some of us who grew up in Western liberal democracies can't even fathom any other systems that may exist and still function well* (depends on your objectives).

So it's not state owned but might be state controlled, and ownership could easily be changed without the employees having a say?

(I am neither for nor against the company and have no skin in the game)

You've got it. Similar to Facebook's shareholders, except with more Xi and less Zuckerberg.

If it’s run by a state approved trade union it’s run by a Communist Party approved trade union in which all senior positions are held by CPC cadres, and possibly all positions. That makes it an organ of the CPC and thereby of the party-state.

> So it's not state owned but might be state controlled

What's the difference?

Unless it actually has vote rights, it should be called what it is, corporate bonds.

The distinctions between stocks and bonds are fairly fluid, in practice.

High finance & legals are sophisticated. Stocks and bonds are ultimately contracts and if you're not trading them on a market with standards, they can be written however you want. You can have bonds with all the practical implications of stock and the reverse. Voting rights and fixed interest. No voting rights, but with dividends, etc.

That's not what a bond is.

Google's GOOG shares shareholders do not have the right to vote, it is being traded at $1,236 per share, while GOOGL shares have the right to vote, it is being traded at $1,241 per share, that 0.5% difference is the market pricing of the right to vote.

In the context of GOOG vs GOOGL, the voting rights are basically moot. Larry and Sergey's super shares dominate the votes anyway.


I'm not familiar with the particulars of the Google situation, but in any case you're right. A proper share does not require the holder be entitled to vote. What matters is that the share is the property of its owner. It's not merely a contract, like an option to purchase shares in the future, or employment, or an agreement to be paid royalties or profit. A share is property that is owned in perpetuity or until the corporation is dissolved. It can be bought and sold as though it is just another thing.

If Huawei wants to redefine that then we have to evaluate what a corporation is and what is even means to be an "owner" of such a thing.

"which are canceled when an employee leaves the company"

This however makes for quite a big difference. How the hell do you sell the damned things? If you accrue many "shares" what's to stop you being fired to nullify them?

Hard to see these as valuable without a secondary market and maybe with no liquidity at all...

It's like China's unions, it's just titular to make it sound legitimate.

Well, I guess there is kind of a paradox here: an employee owned company would eventually cease to be an employee owned company if employees individually sold their shares to third parties. Or at the very least you would have to keep issuing new shares to employees as they got sold in order to keep the proportion of ownership by majority in the hands of the employees which would presumably end up devaluing them massively.

There is a degree of incompatibility between employee ownership and how we think about equity in traditional companies. This isn't to say that selling the company needs to be impossible, but it may only be possible with collective decision making rather than individual shares being easy to buy and sell as they are on a public stock exchange.

The problem I see with Huawei in this case is less to do with being able to treat your ownership share as an easily fungible asset and more to do with the fact that it appears the employees do not have effective control over the company. i.e. they don't get a say in who's on the board, financing decisions or anything like that. If employees through a fair, democratic system effectively have sovereignty over what the company does (and there's no one with a massive ownership stake to veto them hanging around) then you have some semblance of legitimate employee ownership.

The buy-back mechanism isn't great either, if that is how you want it to work then it should be based off of a fair and independent valuation of the company which it appears that it isn't.

I also think it's unlikely that an employee owned company could have the kind of control over the company that it should have when it's operating from a literal dictatorship.

And you know, even this is all assuming that this article is accurate and not just a FUD think-piece to support the American government's stance on the company, having not really done a great deal of independent research on Huawei myself.

https://en.m.wikipedia.org/wiki/Mondragon_Corporation I assume they found a way to juggle employee ownership.

Oh certainly. My comment wasn't to try to imply that employee ownership or to a stronger extent worker co-operatives were somehow impossible or impractical. I'm actually very optimistic about worker co-operatives in general. My point was more that their ownership structure isn't going to be quite like owning shares in a publicly listed company (as alluded to in the comment I replied to). I understand this is true for Mondragon, at least, where instead workers hold a capital account representing their 'social share' (or ownership stake) that they pay a membership fee into, that profits from the company are paid in to, and from which they can withdraw when they leave or retire.

Yeah I was agreeing with you all along. It requires a different notion of ownership and that's important to point out as you did. I just wanted to point out the preeminent coop navigating what seems like a conundrum from our Capitalist perspective.

If all employees are members of the state... transitive property hehe.

The union in this case might as well be the state.

So obvious.

Btw, check out 7 things not to speak about in china.


I too love the fact that about 90% of your comments relate to China, and you choose to attack OP's motive instead of the article itself here.

Located in Beijing apparently, prominently displays public key in profile. Makes you think.

Yeah. Might be somebody living in China dissatisfied with the government.

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