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Corporate Governance: Models and Factors Essay


The majority of major joint-stock corporations in the world tend to adhere to certain models of corporate governance structure, which are determined by several factors unique to their region and place of origin. Of course, no enterprise is ever like another, as small differences are present here and there. Still, in general, they tend to fall in line with the three major models of governance currently present. These models are the Anglo-US model, the Japanese model, and the German model (Three Models, 2008). These three, named after their countries of origin, have a dominating presence over their respective spheres of influence. However, certain corporations prefer to deviate from the norm. Despite being located in China and largely exposed to the influence of the Japanese model, the Huawei company employs a system of corporate governance more akin to that of the Anglo-US sector with an innovative management system. This paper is dedicated to the study and elaboration of this subject.

Chinese companies usually remain a mystery to a western investor, as they do not share the policies of openness and transparency that are a staple of the Anglo-US model. Huawei is among the few corporations emerging from the obscurity to be able to compete in the US market, despite the governmental restrictions and competition in the face of local heavyweight companies such as Apple. The company’s efforts of reaching out to prospective investors and partners began with an interview with Fortune (Lev-Ram, 2013). From that interview, the world was able to learn about how the company works, and about the innovations in its corporate governance structure.

During the interview, the company’s acting CEO Guo Ping said that all of the stakeholders are employed within the ranks of the company. This is a change to the classic Anglo-US model that tends to have both inside and outside stakeholders. In Huawei, all stakeholders are insiders. As the acting CEO explained, not every employee is a stakeholder, but every stakeholder is an employee. Guo Ping was the one to propose the stock options to the company after he visits the USA (Lev-Ram, 2013). However, while certainly inventive, this is not the most unusual part of Huawei’s corporate governance structure.

The company is famous for introducing the CEO rotation system. It works like this – eight executive managers in the total form a council board. The board is responsible for making decisions that have a direct impact on the company, such as deciding how much should the employees be paid or promotions of talented individuals to new positions. One of them becomes a CEO for 6 months, before returning to the council and giving way to another member. This format is vastly different from the classic leadership structure, which is very centralized. In it, the CEO is the centerpiece of any success or failure (De Cremer, 2015).

The idea of interchanging leadership comes from a book called Flight of the Buffalo by James Belasco and Ralph Stayer. The company is compared to a flock of birds that always flies in a V-formation. However, the leading bird is rarely the same every time. The idea behind this is to prevent the flock from perishing, should the leader bird die. The same principle is applied to Huawei – by decentralizing its commanding structure, the corporation becomes more stable, as it has not one but 8 talented executive managers that are capable of interchanging positions between one another in times of crisis (De Cremer, 2015). By adopting the CEO rotation strategy, Huawei managed to advance from the model that revolved around a singular, all-mighty CEO – something that remained unchanged for far too long.

References

De Cremer, D. (2015). Leadership innovation: Huawei’s rotating CEO system. The European Business Review. Web.

Lev-Ram, M. (2013. Fortune. Web.

(2009). Web.

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IvyPanda. "Corporate Governance: Models and Factors." August 1, 2020. https://ivypanda.com/essays/corporate-governance-models-and-factors/.

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IvyPanda. 2020. "Corporate Governance: Models and Factors." August 1, 2020. https://ivypanda.com/essays/corporate-governance-models-and-factors/.

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IvyPanda. (2020) 'Corporate Governance: Models and Factors'. 1 August.

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