ZTE names new board per Commerce Department agreement

ZTE has taken another step forward toward convincing the Commerce Department to lift the ban imposed on ZTE’s access to U.S. communications technology. The company has replaced its board of directors with a new slate of officers, one of the requirements for repeal of the ban (see “ZTE must disclose Chinese government stake as part of new agreement”).

The company’s previous 14 board members – Chairman Yin Yimin as well as Zhang Jianheng, Luan Jubao, Zhao Xianming, Wang Yawen, Tian Dongfang, Zhan Yichao, Wei Zaisheng, Zhai Weidong, Richard Xike Zhang, Chen Shaohua, Lü Hongbing, BingshengTeng, and Zhu Wuxiang – resigned June 29. Li Zixue is chairman of the new board. As of June 29, the board comprised two executive directors (Li Zixue and Gu Junying), three non-executive directors (Li Buqing, Zhu Weimin, and Fang Rong), and three independent non-executive directors (Cai Manli, Yuming Bao, and Gordon Ng).

The board turnover is one of several hoops through which ZTE must jump to comply with an agreement reached last month that would suspend the current ban on access to U.S. technology. Other near-term requirements include the payment of a $1 billion fine and the placement of another $400 million in escrow in a U.S. bank. Press reports indicate that ZTE hasn’t yet met both financial requirements, with details of the escrow account possibly the sticking point.

Among other requirements in the longer term, the Chinese communications technology company also must fire everyone with a title of senior vice president or above, as well as any executive or officer who participated in the activities that triggered the original disciplinary action or the current technology ban.

Meanwhile, the Trump Administration has work to do to ensure ZTE’s actions don’t go for naught. The U.S. Senate approved a defense funding bill that included language that would kill the deal with ZTE. The Senate version of the bill must be reconciled with that of the House, whose version does not include provisions to scuttle the deal. It’s likely the Administration will work behind the scenes during the reconciliation process to prevent the Senate’s language from forming part of the final bill, lest President Donald Trump face the uncomfortable choice of whether to veto the much needed spending package to meet his agreement with ZTE.

It’s also possible that ZTE is waiting to see how this process unfolds before it hands over any cash to U.S. authorities.

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