The chaos of the centralization of power in Foxconn: the "bribery door" nest case

The Empire, Mr Gou, chairman of Hon Hai Group (2317.TW, the mainland's "Foxconn"), is experiencing a "bribery door".

After a spate of jumps that made Hon Hai A public focus, the new troubles "patronized" Hon Hai. In recent days, Hon Hai Group breaking senior executives suspected of bribery to suppliers News was disclosed by the media. In the case of media coverage, Hon Hai said that most of the cases were untrue and pledged to disclose them within one months.

However, according to the "China Business daily" reporter from the authority of the exclusive knowledge, as the mainland police in the case during the accident seized Hon Hai Group SMT (Surface Mount Marvell, Surface Assembly Technology) Technical Committee Director-General and manager Deng Zhixian criminal Facts, It also triggered a wave of anti-corruption in the Hon Hai Group system.

Why did this "bribery door" arise? What is a seamless purchase management system in Hong Hai? This reporter after nearly one months of continuous investigation, trying to peel open layers of fog.

The suspect "shook" the bribe door.

2012, Deng Zhixian in the SMT involved in purchasing up to tens of billions of yuan, at the helm of SMT for many years Deng Zhixian also become a supplier "on the" important link.

"Deng Zhixian's fall was a fluke. "January 24, 2013, the reporter from an authoritative knowledge of the people to know the exclusive:" He was the other cases of a person involved in the report by the mainland police control. ”

Deng Zhixian, more than 50, is the Director-General and manager of SMT (Surface Mount Marvell, Surface Assembly Technology) Technical Committee at Hon Hai Group. According to the reporter understand, in addition to Deng Zhixian was caught, there are a number of technical committee cadres were assisted in the investigation, and as SMT former senior vice president and SMT Technical Committee of the Vice-Chairman of the Lio Vancheng due to the case is closely related and disappeared.

It is reported that Hon Hai Group has more than 30 technical committees, which are responsible for a specific area of procurement and project audit work. In addition to SMT Technical committee, also like IE (production engineering) technology Committee, Automation Technology Committee, the Institute of Product Technology Committee. The personnel of these technical committees have a certain right to decide on procurement.

People familiar with the operation of the Hon Hai Group said that the role of the CST in procurement is similar to the "expert committee" of many domestic bidding centres. It is necessary for the Technical Committee to review the rationality of the production process in the field of production process and production technology.

It is such a system design, virtually let Deng Zhixian and other technical committee key people have the core of procurement power. It is reported that 2012, Deng Zhixian in the SMT involved in the procurement of up to tens of billions of yuan, the helm of SMT for many years Deng Zhixian also become a supplier "on the" important link.

However, the night road is much easier to hit a ghost. Authorities have exclusive to reporters, because other cases of the people involved in order to meritorious, confided in Deng Zhixian and other people's bribery details. In September 2012, the Shenzhen procuratorial organ imposed an arrest on Deng Zhixian. It is reported that Hon Hai Group Chairman Terry Gou, after learning the case, made clear that the mainland police will be able to dig deep, the Hong Hai Group procurement links to the "borers" to eradicate.

At the same time, the Shenzhen Government High level also attaches great importance to the case. An ordinary bribery case, because Hon Hai in Shenzhen's important position of the economy is particularly sensitive. It is reported that the parties are fully investigating the Deng Zhixian behind the other higher level of the case. As the case is still in the detection stage, the reporter's interview was also declined by Shenzhen related departments.

Prior to Taiwan media reports, Hon Hai Group chief executive and business chief Jinming received a letter of complaint in September 2012, the letter accused SMT senior executives for a long time to bribe suppliers. Mr. Gou asked to report to the mainland public security authorities and asked Jinming to form a team to do an internal investigation. The local criminal Bureau of Taiwan received a report from Hon Hai, and the mainland police have been briefed on the investigation, and has been helped to investigate more than 10 Hon Hai executives.

Hon Hai has issued a statement saying that most of the above mentioned cases, such as Taiwan and other media, have been inconsistent with the facts. But Hon Hai said the chairman, Terry Gou, had instructed that the fraud officers and the cause would be strictly checked and that the incident would not be allowed to happen again.

"Perfect" procurement system to keep loopholes

"In addition to the" collusion "with the group boss, the technical committee such as SMT has a dominant position in equipment procurement. ”

On the surface, Hon Hai's procurement system can be called a standard.

A company engaged in procurement before the Hon Hai told reporters that its procurement system is mainly divided into BOM (BOM) procurement and non-BOM procurement. Where the BOM is used to produce the necessary accessories and raw materials, usually a larger part of the consumable; non-BOM procurement refers to the production process, including equipment, accessories and so on.

The normative body of Hon Hai Procurement system now, suppliers are required to undergo rigorous screening. All products (BOM and non-BOM) before purchasing, suppliers must have complete legal personality, product safety needs to meet a variety of certification requirements. In the screening process, will first arrange the birth control (production management), QC (Quality Management), Work pipe (project management), management (funds control) of the four departments to inspect the factory. However, if the procurement involves a non-BOM equipment or BOM with a specific production process products, the Technical Commission will be final. After the examination is qualified, can send the supplier a code, means that it has obtained the procurement qualification.

After the selection of good suppliers, the product must also be tested. When the sample is qualified, the quotation will begin. Hon Hai is good at parity, so buyers will often ask for price down (lower prices), which will bring greater profit pressure on suppliers.

Supplier codes can be obtained after suppliers have signed a supply contract with Hon Hai, but that does not mean it is safe to be a Hon Hai supplier. Quarterly evaluations will directly affect the qualifications of their suppliers. Each assessment is still under the joint responsibility of the health management, quality control, works management and the four major pipeline operators.

The four pipelines are the unique management method of the creative establishment of Hon Hai, which is independent of the four departments, but also closely cooperating to monitor and manage the daily production and operation of the enterprise. The management system looks very "perfect" and it seems difficult for suppliers to get four heads together. But it's not. Usually the heads of the four major pipelines are subordinate to the business Group (Hon Hai Group has many business groups below, in charge of different plates) the vertical department below. "If the boss of the business group greets, the situation will be different." ”

"In addition to the" collusion "with the group boss, the technical committee such as SMT has a dominant position in equipment procurement. Although the four major pipelines must be gatekeeper, the CST is the last to sign. Moreover, if any of the four major pipelines were not signed, the CST could also exert pressure on them to facilitate their procurement. "An employee who has been in the production management of Hon Hai for many years told reporters.

Jiassu, a senior person with a Shenzhen company with a more than 10-year relationship with Hon Hai, said to reporters that Hon Hai, the British industry, and Taiwanese companies were different from the early Taiwanese family companies that entered the mainland, and that "in the early Taiwanese family business, from finance to bosses, they were family, They rarely choose bribes in order to get purchase orders, but now Hon Hai, the Taiwanese cadre with great power, can be a shortcut for suppliers to get orders. In Hon Hai, as long as dare to the Taiwan to hit the money, a lot of things are good to do. ”

In the case of centralization of power and lack of self-discipline of cadres, Hon Hai's strict procurement system is facing great challenges.

Anti-corruption shock wave

Hon Hai's supplier system is undergoing shocks, and its interior is undergoing adjustment.

After the Deng Zhixian bribery incident was exposed, some companies that have a partnership with Hon Hai are also experiencing shocks.

The source said Hon Hai has terminated its cooperation with suppliers of the German law in Shenzhen. Shenzhen de law main production of electronic products testing equipment. At present, however, the law does not recognize bribery. And in the "China Business newspaper," a multi-party investigation, can be determined, is located in Dongguan for the Hon Hai To do SMT supporting enterprises have been involved. It is reported that with the further investigation of the Deng Zhixian case, Hon Hai's supply chain will be adjusted accordingly.

Hon Hai's supplier system is undergoing a shock, and its interior is undergoing adjustment. Recently, Hon Hai Staff disclosed to reporters, igdbg (green number) business group has been in the sea of bribery in the door of the controversy, the staff diversion is basically over.

"has been agreed to leave, so far a lot of people, our department is left me alone." "The original igdbg (green number) business group, an employee told reporters," said the dissolution is igdbg related responsible for commercial crime, the cause of two consecutive years of loss, he and his several cronies under the big rebates. Eating too badly, Guo provoked anger. ”

According to insiders revealed that the dissolution of the group of notice issued, the original igdbg responsible for television and led production line staff were diverted to CCPBG (consumer electronics) business Group, tablet computer production line staff were diverted to FIH (Foxconn International). There are employees who say CCPBG is difficult to accept. In just two months, thousands have been separated from the triage process.

igdbg New green Number business group was founded in early 2012, its department was established in June 2009 TMSBG Business Group (Technology integration service, Marvell Merging Services Business Group) restructuring renamed. Since 2009, in Hengyang, Hunan has built a production research and development base. To research and development, manufacturing e-books, tablets, electronic photo frame, led energy-saving lamps, intelligent air filters and other products for the main business, is the global E-ink e-books, digital photo frame suppliers. Igdbg was originally a Foxconn product innovation and the transformation of an important business group, but since its inception, nearly two consecutive years of loss. For this reason, Mr Gou has repeatedly warned that he will turn a profit.

Set up less than a year of green number of the cause group was abolished, for Hon Hai, is the anti-corruption to adjust the department, or have other considerations? In this regard, as of the press, Hon Hai has not yet responded.

Hon Hai said recently that it had amended its procurement procedures to strictly tighten the code of conduct and not allow similar incidents to happen again. However, in the Supply Chain Management department, there is no systematic revision of the document on a large scale. "Foxconn's regulatory regime is already regulated, but the case of a corruption den still needs to be rethought at the institutional level." Said a Foxconn management cadre.