CEO Daily: Tuesday, September 22


If China is ever going to be a business innovator, and not just a fast follower, it should let Huawei lead the way. I visited the company’s Shenzhen campus today, and was impressed with its determination to be a global leader in building out the “internet of things.” Huawei believes the world will move from 10 billion connected devices today to 100 billion a decade from now, and it wants to play a leading role transmitting, storing, processing, analyzing and displaying the data that results.


While relatively small compared to China’s state-owned behemoths – it is only 228 on the Fortune Global 500 – Huawei is unique among Chinese companies in its outward focus. Consider:


–67% of its business originates outside of China;

–78% of its debt financing comes from outside of China;

–82% of its suppliers are outside China.


Moreover, the company has pioneered a global open innovation platform that includes research partnerships with leading companies and universities around the world. As a result, it has become a major technology player in every major global market save one. The one? The United States, where it is hampered by fears that its technology allows unauthorized access to the Chinese government. Those fears, fueled by the fact that Huawei’s founder began his career with the People’s Liberation Army, are vigorously denied by the company, which has made cyber security a hallmark of its global offerings.


One more thing makes Huawei unique: it is 100% employee-owned, which allows it to focus on the long-term and devote more than 10% of its revenues to research and development and involve 45% of its employees in the R&D effort. “We believe our (ownership structure) is the best,” said Lifang Chen, the company’s director of public affairs. “We do not face external pressure. We decide what we should do.” A lot of Huawei’s competitors would like the same freedom.


More news below.




Top News

 Clinton's words rattle biotechs

Some of the largest biotech stocks, including Biogen and Celgene, were dented on Monday after Democratic presidential candidate Hillary Clinton lamented price gouging in the specialty drug market in reaction to a New York Times story that talked about the massive 5,456% increase of a 62-year-old drug. Investors were clearly spooked by fears the government could seek to regulate the industry.  USA Today

BofA CEO should be out of a job

Bank of America shareholders will vote today on whether the bank's board had the right nearly a year ago to make CEO Brian Moynihan both chairman and chief executive. The issue is that back in 2009, shareholders voted to force the company to split the two positions but without approval, the board recombined them. A number of large pension funds are expected to vote against a provision to give BofA's board power to combine those roles and proxy voting services have suggested the same.  Fortune

Walker drops out of GOP race

Wisconsin Gov. Scott Walker became the second candidate to drop out of the race for the Republican presidential nomination, tripped up by lackluster debate performances and weak polling. Walker, once seen as a top-tier candidate and at one point commanding a strong lead in the polls for Iowa, registered support from less than one-half of 1% of voters nationwide in a CNN poll released on Monday. He leaves the race less than two weeks after Rick Perry, the former governor of Texas, became the first to exit. Fortune

 Peanut company CEO gets jail time

The former owner of a peanut company in Georgia and two other executives were given jail time for their roles in a salmonella outbreak that killed nine people and sickened hundreds in a case that was tied to one of the largest food recalls in U.S. history. Stewart Parnell, who once oversaw Peanut Corporation of America, got 28 years while his brother was sentenced to 20 years in prison. Prosecutors had alleged that the brothers had covered up the presence of salmonella for years.  Reuters

Around the Water Cooler

 Apple in fast lane for electric car

Apple has apparently accelerated plans to ship Apple-branded cars in 2019.  The Wall Street Journal reports that to meet that target, leaders of the project have been cleared to triple the 600-person team. The investment suggests that the tech giant sees room for it to compete in the automotive sector, and in a pocket currently dominated by Tesla and Nissan. Questions remain about the market for electric cars (especially considering weak gas prices) and Apple's ability to make complex vehicles in such a short time period.  WSJ (subscription required)

 Fiorina's HP record in four charts

There is a debate brewing about Carly Fiorina's record when she ran Hewlett-Packard – and four charts by Fortune's team aren't exactly bolstering her claims of success. Fiorina has said that she led HP during a tough tech recession and has also claimed she did better than rival executives at other firms. The market doesn't agree. From the time she started as CEO to right before she left, HP's stock fell over 60%. That was a worse performance than any of its rivals. Fortune

 EPA pressure led VW to admit fault

For more than a year, Volkswagen executives told environmental regulators that discrepancies between pollution tests on its diesel cars were a technical error, not an attempt to dupe officials. But VW only finally admitted it was lying after the Environmental Protection Agency threatened to withhold approval for the company's 2016 models. That power, the New York Times argues, is significant as it gave the environmental regulators real leverage – more than what auto safety regulators have at their disposal. The news badly dented VW's shares on Monday.  New York Times (subscription required)

5 things to know today

VW scandal and Bank of America shareholders vote--5 things to know today. Today's story can be found here.

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