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 With the latest version of Apple's smash hit smartphone having
catapulted first-quarter profit 55 percent higher, investors have
sent shares in Hon Hai Precision Industry Co Ltd - Foxconn's
flagship - rising towards the historic highs hit eight years ago
that give it its lofty market value.
Within two years, though, analysts expect annual iPhone shipments
growth to slow to a fraction of 2012's boom. If few question Gou's
management savvy, investors say they're stuck in the dark on
broad-brush plans to diversify into new tech like electric cars and
robots, as well as waiting to hear how he intends to make good on
pledges to crack new markets like India, Brazil and Indonesia.
That's how Gou prefers it, he explained at his once-a-year reckoning
with investors in last month's annual general meeting. "I have a lot
of the information they want," he said, referring to big foreign
institutions, which make up 48 percent of Hon Hai's shareholders,
"but I insist on not making it public."
Gou's business instincts have served him well, building the world's
biggest contract maker of electronic gadgets from scratch more than
40 years ago. Yet at 64, the chairman and chief executive's maverick
approach to transparency also stretches to lack of precise word on
succession plans, leaving company watchers trusting his skills but
wondering what kind of business Hon Hai will become, and who will
run it in future.
Sovereign wealth funds from Norway, Singapore, Saudi Arabia and Abu
Dhabi rank among Hon Hai's top 10 shareholders - and Gou himself is
the biggest single investor with a direct 12.5 percent stake, making
him one of Taiwan's richest men. But Gou said sharing information
with them would be unfair to the army of retail investors who own
nearly 40 percent of Hon Hai, outnumbering foreign shareholders 220
to 1.
"He doesn't tell you 'this'. He doesn't tell you 'that'. Nothing you
can do about it," said Andrew Yang, head of Taiwan investments at
Manulife Asset Management, which regularly buys Hon Hai shares. "If
(Gou) can deliver results, then all you can do is believe he has
competitiveness."
'WHEN I'M 100'
It's not unusual for company founders to retain a tight grip even
after they take their firms public. But as demands for better
corporate governance grow across Asia, some tech barons have moved
to address concerns.
Masayoshi Son at Japan's SoftBank Corp - for which Hon Hai assembles
a humanoid robot called Pepper - has named a potential successor as
CEO, while the head of Japan's secretive industrial robot maker
Fanuc Corp yielded to activist investor pressure and agreed to meet
shareholders twice a year after avoiding them for years.
At Hon Hai, Gou is tough to pin down most days of the year and
tougher still to figure out, according to people who have worked
with him. Speaking on condition of anonymity, they said he can be
cool-headed and efficient in business dealings, yet in public his
comments remain lofty, taking time at the AGM to talk up emerging
markets overtaking the industrialized Group of Seven nations as
world growth drivers by 2050 - when he turns 100.
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"Of course, I will still be around," he told shareholders.
Gou sets great store by personal relationships and many Hon Hai
decisions ultimately rest on key meetings he has with various
government authorities or business partners. If he isn't there, the
plans simply aren't final, the people who have worked with him said,
regardless of projected timelines or investment figures given
earlier.
Asked to comment for this article, Foxconn said Gou is actively
involved in all aspects of Foxconn's business, including recruiting
a "strong and deep executive team," according to a company statement
provided to Reuters.
"Any succession plan will include a management structure that
ensures that at the appropriate time there is a leadership team
well-prepared to assume any and all aspects of the management of our
company," Foxconn said.
Hon Hai is moving in the right direction, analysts said, but
diversification will take time. A long-awaited $1 billion investment
in Indonesia, touted by Hon Hai as a major move, remains in
negotiation limbo, and plans to develop in both India and Brazil
have yet to take concrete shape.
"We don't know what kind of picture Terry wants for the Hon Hai
kingdom," said Kylie Huang, an analyst with Daiwa-Cathay Capital
Markets in Taipei.
A group of foreign institutional investors has been engaging with
the firm since 2012 with gentle entreaties to raise its game on
governance. They say Hon Hai is paying attention and that change is
coming slowly, such as getting regular access to senior executives
close to Gou.
But activists are watching the story unfold, particularly with a
view to smooth management succession.
"Without (Gou) starting to delegate," said Hans-Christoph Hirt, an
executive director at Hermes Equity Ownership Services Ltd,
"stepping back from some of these key relationships and simplifying
the corporate structure, it is very difficult to see how someone
could step in successfully."
(Editing by Kenneth Maxwell)
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