Caixin
Jun 26, 2019 10:00 AM
TECH TALK

Electronics Legend Terry Gou Says He’ll Retire, But Will He Really?     

China has become a master at manufacturing larger-than-life high-tech personalities these last two decades, possibly even overtaking the U.S. in the art of creating these nearly cult-like characters. But as a first generation of such high-tech titans ages, the question of succession has started coming into focus. That includes whether or not this group can ever truly hand over their empires to others, the best way to do that, and whether such handovers are a plus or minus.

The issue was center stage last week when one such company, Taiwan high-tech gadget giant Foxconn, announced a formal succession plan for its celebrity founder and longtime chief Terry Gou. While Gou is revered in his native Taiwan, he is also well-known on the Chinese mainland since his company, also known as Hon Hai, is one of the mainland’s largest employers with more than 1 million workers spread over a wide range of locations.

The company, known in the industry as a contract manufacturer that makes gadgets for other big brands, is best known as one of the most important production partners for Apple’s iPhones. But it also counts many of the world’s other high-tech hardware makers as current and former customers, including the likes of Dell, Microsoft, Amazon and Sony.

Gou’s succession plan has been in the works for a few months now, ever since he announced in April he would run for Taiwan’s highest elected office. Last week the company announced that Liu Yong-way, former head of Foxconn’s chip unit, will take over the mantle as chairman when Gou leaves. The company has also announced that no one person will replace Gou as CEO, but instead that role will fall to a committee of nine people.

This kind of collective leadership seems quite Chinese, and is often aimed at reaching consensus by a group of top officials on important topics like a company’s strategic direction. But the bigger question remains over whether such group-leadership is really practiced, and how effective it is. Then there’s also the question of whether such leadership is really window dressing, as the original leader continues to make all the important decisions behind the scenes.

Before I launch into my thoughts on that, I wanted to briefly discuss China’s somewhat unique penchant for creating celebrities out of its high-tech leaders. In the high-tech realm the pantheon of legends includes the likes of Alibaba founder Jack Ma, Tencent founder Pony Ma and JD.com founder Richard Liu, just to name a very few.

Such tycoons are household names for many Chinese, and are frequently chased down at public events and asked for their autographs and views on a wide range of issues. Sure, the U.S. has its own group of high-tech celebrities, including the likes of Microsoft co-founder Bill Gates, Apple co-founder Steve Jobs and Facebook co-founder Mark Zuckerberg.

But whereas the Western tech titans generally tend to keep a low profile and are mostly consulted on their areas of expertise, the Chinese variety are more like true celebrities. In my view, this different emphasis may derive from China’s strong focus on education and academic achievement, with the result that young academic achievers generally also get similar celebrity status. By comparison, many such young people in the West might be branded as “nerds,” especially by their peers.

Gone but not forgotten?

All of that said, let’s spend the second half of this column looking at the questions I raised above, namely whether people like Gou ever truly leave the empires they built or whether they continue to call the shots behind the scenes, and whether that’s a good thing or a bad one.

The question is relevant not only for Foxconn these days, but also for e-commerce juggernaut Alibaba as Jack Ma gets set to officially retire as the company’s chairman on Sept. 10. Similar to Foxconn, Ma has set up a 13-member committee to make key decisions following his formal exit.

I polled a few of my tech friends on the matter, and the general consensus dovetails with my own view from my years covering this group. That’s to say most of us believe that Gou, Ma and anyone else who declares his intention to step down will probably continue to call the shots from behind the scenes.

Some pointed to practical matters, which could certainly be an issue for someone like Gou, since his personal connections from years of working with mainland officials could be critical to the company’s continued success. That factor is probably less important for some of China’s other tech leaders like Jack Ma and Pony Ma, since both of their companies likely have vast internal networks devoted to government relations. What’s more, neither Jack nor Pony is particularly known for his fondness for government networking.

One of my old China hand contacts pointed to a notable and probably typical case involving former electronic retailing magnate Huang Guangyu. Even after being sentenced to jail in 2010 for bribery and insider trading, Huang famously continued to run the show at his Gome chain of home electronics stores.

“He continued to call the shots despite behind bars — this is succession plan China style,” my contact said. “This is a recurring theme of China. It is unique and different from international markets in many ways, and all these must be factored in by foreign companies.”

On the question of whether this inability to cut the cord is a good thing or not, I can only give my personal view that it’s a mixed bag. On the one hand, Terry Gou’s contacts, not to mention his general vision, would inevitably be helpful to the company even after he leaves his day-to-day roles.

At the same time, I’ve seen plenty of entrepreneurs find early success, only to lose their edge later on but refuse to let go until their companies became irrelevant. Former e-commerce pioneer Dangdang and early gaming leader Shanda are two prime examples in that regard. At the end of the day, vision does seem to be an ingredient that needs to be continually renewed through promotion of new leaders. Accordingly, I’m somewhat skeptical that collective decision-making combined with guidance from an aging company founder is the right formula for these tech giants to guarantee their future success.

Doug Young has lived in Greater China for two decades, including a 10-year stint at Reuters, where he led China corporate news coverage. Send your questions or comments to DougYoung@caixin.com

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