Huawei Technology Co Ltd (SHE:002502) is the second-largest supplier of telecomunicatons network equipment in the world—the company is also the biggest that uses a rotating CEO structure. The rotating CEO system was adopted by the company in 2011.

Huawei

Presently, three senior executives—Guo Pin, Eric Xu, and Ken Hu each take a six-month spell filling the CEO position before they are given one year “off.” Obviously, each remains at the company in other capacities while on their sabbatical from the position of chief executive.

Huawei lead by three CEOs

“Other companies may pick just one person to be the leader, but at Huawei Technology Co Ltd (SHE:002502), we’ve chosen to let a small team lead the company instead,” said Chen Lifang, a Huawei senior vice president and board director, in a recent interview. “The rotating CEO mechanism is one form of Huawei’s innovations.”

Huawei Technology Co Ltd (SHE:002502) presently has 13 board directors, including Ms. Chen (quoted above) and each is given an equal vote. However, the three rotating CEO’s also oversee additional committees at the company’s headquarters in the south of China giving them a bit more power than their equal votes allow. Mr. Guo heads Huawei’s finance committee and Mr. Hu heads the human resources committee, while Mr. Xu leads the business strategy committee.

Ren Zhengfei, who founded the company in 1987, remains a figurehead CEO as the three rotate into a position known as acting CEO. Perhaps “figurehead” diminishes Mr. Ren’s position, as he does have the right to veto board decisions. This is a power he has never used according to Ms. Chen, making him the Queen Elizabeth to Gordon Brown. And not unlike the Queen of England who cannot address Parliament, Mr. Ren does not have the right to make specific policy recommendations.

Huawei’s rotating CEO system

Since Huawei Technology Co Ltd (SHE:002502) adopted the rotating CEO system in 2011, Mr. Ren has been spending a lot of time coaching and mentoring the three rotating CEOs, according to Ms. Chen.

It’s not clear whether Huawei adopted this system as a way to better choose the successor to Mr. Ren when he steps away from the company or he dies. Huawei Technology Co Ltd (SHE:002502) suggests that the system is not designed this way but outsiders question whether this is the case. Either way the company has declined to comment on the permanency of the rotation system.

“Traditionally, one person was authorized to act as a company CEO, and the fate of the company rested with this single person,” Mr. Ren has said in his statement about the rotating CEO system on Huawei’s official website.”History has proven time and again that this practice poses greater risks.”