Xiaomi Executive Fired - Analysis of Anti-Fraud Systems and Compliance Suggestions of Major Companies
On September 8, 2025, Xiaomi Corporation announced the handling of violations and disciplinary issues involving Wang Teng, an employee of its China region. It was found that he leaked the company's confidential information and engaged in serious violations and disciplinary offenses such as conflicts of interest. In accordance with the "Measures for Handling Violations and Disciplinary Offenses by Employees of Xiaomi Group", the "Xiaomi Group Integrity and Clean Government Manual" and other regulations, the company has decided to dismiss Wang Teng.
According to the above announcement, Wang Teng's dismissal was not due to the previously rumored reasons such as non-public bribery or embezzlement of office, but rather "leaking confidential information" and "conflict of interest". It is easy to understand the leakage of confidential information, but "conflict of interest", as a fraud behavior that frequently occurs among corporate executives and has a significant influence on the company, is rather concealed. This article will analyze the key points of "conflict of interest" in the anti-fraud systems of large companies, and introduce the basic processes of internal anti-fraud and external lawyer intervention in large companies, providing compliance suggestions for enterprises' anti-fraud efforts.
I. What is the conflict of Interest among large Companies
Conflict of interest usually refers to the conflict between the interests of the employer represented by the employee's own position and their personal interests. Generally speaking, companies will formulate conflict of interest management systems based on their own characteristics. Common conflicts of interest mainly fall into the following categories:
1. Conflicts in similar business operations
This kind of conflict of interest refers to the behavior of senior management personnel such as directors and managers of an enterprise, taking advantage of their positions, to operate or assist others in operating businesses similar to those of the companies or enterprises they serve, thereby obtaining illegal profits and possibly harming the interests of the companies they serve. In short, it means that the executive himself or his relatives and friends open a company outside with similar business to the company he works for. This kind of behavior seriously harms the interests of the company he works for. The risks that workers face when violating similar business conflicts mainly fall into the following two categories:
• Violation of non-compete regulations
After the termination or dissolution of a labor contract, a worker shall not take up a position in an employer that produces similar products, operates similar businesses or has other competitive relations within a certain period of time, nor shall he or she produce similar products or operate similar businesses that are in competition with the original employer on his or her own. As specific individuals who hold the core information of the company and have the power to manage and make decisions, senior executives of a company, while enjoying the company's operating profits, also bear the obligation of non-compete to prohibit engaging in business that conflicts with the interests of the company they serve. Senior executives are the main subjects of non-compete restrictions, and they usually have access to the company's core business secrets and business strategies. Violating non-compete restrictions usually requires the payment of a penalty in accordance with the non-compete agreement. Even if the penalty is paid, the non-compete obligation must still be fulfilled until the expiration of the agreement as long as it has not been terminated. At the same time, the non-compete economic compensation already paid by the company must be returned. If the breach of contract causes actual losses to the company that exceed the amount of the penalty, The company can demand that senior executives compensate for this part of the loss.
Suspected of the crime of illegally operating similar businesses
The crime of illegally operating similar businesses refers to the act of directors, supervisors and senior management personnel of a company or enterprise taking advantage of their positions to operate or assist others in operating businesses similar to those of the company or enterprise they serve, thereby obtaining illegal profits in a huge amount. The crime of illegally operating similar businesses is a specific charge targeting senior executives of enterprises, aiming to prevent them from taking advantage of their positions to transfer benefits. The criteria for identifying "similar business" should be based on the "subcategories" in the "National Economic Industry Classification" as the fundamental principle. The manifestations of "similar business" behavior include not only horizontal competitive relationships but also vertical competitive relationships that partially harm the interests of the company. The important purpose of establishing the crime of illegally operating similar businesses is to prevent company executives from abusing their power to engage in unfair competition with the company, thereby safeguarding the company's interests. In a broad sense, the market operation activities carried out by a company to obtain commercial benefits not only include the production and manufacturing of goods (services) themselves, but also the related business activities such as transportation, warehousing, wholesale and retail of goods (services), which have vertical upstream and downstream connection relationships. If the amount of illegal profits exceeds 100,000 yuan, it meets the threshold for filing a case, and the maximum penalty can be up to seven years in prison.
2. Conflicts in related-party transactions
This kind of conflict of interest refers to the behavior where company managers (such as major shareholders, actual controllers, directors, supervisors, senior management personnel, etc.) use their influence to make the company conduct transactions with themselves or related parties with whom they have special relationships, thereby harming the overall interests of the company or the rights and interests of other shareholders. In short, there is an affiliated relationship between the two parties involved in the transaction. The senior executive uses his power to arrange for the company related to him to conduct transactions with the company he works for at a lower price or under more lenient conditions, thereby harming the interests of the company.
Bear the liability for compensation
The responsibilities that need to be borne for related-party transactions are clearly stipulated in the Company Law and its judicial interpretations.
Article 22 of the Company Law stipulates: "The controlling shareholders, actual controllers, directors, supervisors and senior management personnel of a company shall not use related-party relationships to harm the interests of the company." Where any person violates the provisions of the preceding paragraph and causes losses to the company, he shall bear the liability for compensation. Provisions of the Supreme People's Court on Several Issues Concerning the Application of the Company Law of the People's Republic of China (V) (Amended in 2020) stipulate: The related-party transactions have harmed the interests of the company. The plaintiff company, in accordance with Article 84 of the Civil Code and Article 21 of the Company Law, requests the controlling shareholder, actual controller, director, supervisor and senior management personnel to compensate for the losses caused. Where the defendant merely defuses that the transaction has fulfilled the procedures stipulated by laws, administrative regulations or the company's articles of association, such as information disclosure and approval by the shareholders' meeting or the general meeting of shareholders, the people's court shall not support such a defense.
Suspected of the crime of embezzlement of duty and the crime of breaching trust to damage the interests of listed companies
Improper related-party transactions may involve criminal offenses. Depending on the nature of the illegal act, the criminal charges involved also vary. Typical situations include the perpetrator taking advantage of their power to deliberately purchase from related parties at a price significantly higher than the market price or sell to related parties at a price significantly lower than the market price, with the price difference obtained by the related parties and eventually transferred to the perpetrator. Or, senior executives may fabricate intermediate links, introduce affiliated companies under their control as middlemen, and seize the profits that originally belonged to the company. This part of the profits is obtained by the affiliated parties and eventually transferred to the actors. A simpler approach could be to directly transfer the company's funds into the accounts of affiliated companies and then appropriate them for oneself through other means, or to transfer the company's assets to affiliated companies after making free or symbolic payments. All these actions may constitute the crime of embezzlement by an employee.
The crime of breaching trust and damaging the interests of listed companies refers to the act of taking advantage of one's position to manipulate listed companies to engage in improper and unfair related-party transactions, thereby causing significant losses to the interests of listed companies. Common behavioral manifestations include providing assets for free, obviously unfair transactions, providing assets or guarantees to those without the ability to repay debts, and giving up creditor's rights or taking on debts without justifiable reasons. If these behaviors cause huge losses to listed companies, they may face a maximum of seven years in prison. At the same time, the relevant responsible personnel may be banned from the securities market and be prohibited from continuing to engage in securities business or holding positions as directors, supervisors or senior management of listed companies.
3. Specific relationship conflicts
This kind of conflict of interest mainly refers to the situation where, when an employee is performing their duties, due to the special relationship between their personal interests and those of their superiors, subordinates or HR personnel who influence their salary and promotion, it may lead to a conflict between their personal interests and the public interests they are safeguarding. Such conflicts of interest usually do not involve criminal liability, but they have a significant impact on the fair competitive environment and normal personnel management order within the company.
The most notable example is ByteDance's recent dismissal of an employee due to an unreported close relationship with the human resources department, which was regarded as a violation of conflict of interest management regulations. Bytedance's "Conflict of Interest Management Regulations" clearly stipulates that it is prohibited to have close relationships such as superior-subordinate, common direct superior, or one party being the HRBP of the other, and requires employees to proactively report such situations. Many companies have made prohibitions on such situations, especially for senior executives, as it is necessary for the enterprise to standardize management and internal control. If there is a close relationship between the employees of the business department and the human resources department, adverse consequences such as the transfer of benefits and the failure of internal control may occur in internal governance.
Ii. Suggestions on the Compliance System for Corporate Conflict of Interest
Accurately define the concept of conflict of interest
In the process of building a compliance system, the company should list all possible scenarios as much as possible, define concepts broadly, and explain to employees in plain language and with specific examples what a conflict of interest is. Common types include: In addition to the types introduced earlier, when an employee engages in a second occupation that compets with the company's business outside, or transfers business opportunities that should belong to the company to an individual or another company they have invested in, it also falls under the category of conflict of interest.
After clarifying the conflict of interest system, it is necessary to ensure that new employees must receive training on the conflict of interest policy and sign a declaration of awareness upon joining the company. At least one refresher training session should be conducted for all employees every year, using case teaching and other methods to deepen their understanding. The company's ethical standards and policy requirements are continuously publicized through internal publications, emails, meetings and other means.
2. Establish the declaration and disclosure procedures
The declaration procedure is the core for the operation of the conflict of interest system. Declaration should be divided into regular declaration and immediate declaration. All key position employees (such as senior management, purchasing, sales, finance, compliance, etc.) should make at least one declaration of conflict of interest situation each year. The company should formulate a standardized "Conflict of Interest Declaration Form". At the same time, when any employee realizes that they may be facing or are about to face a conflict of interest, they are obligated to immediately report it to their superior and the compliance department. Of course, the company should provide convenient and confidential reporting channels, such as direct supervisors, the human resources department, the compliance department, the internal audit department or a dedicated anonymous reporting channel, to ensure that employees can report quickly.
3. Develop handling and resolution mechanisms
First of all, it is necessary to establish an authoritative and independent review subject. This entity should be detached from the daily management system of senior executives. It can be led by the compliance committee established under the board of directors, and composed of external independent directors, professional legal advisors and third-party auditors, to avoid being disturbed by internal interest relations.
Secondly, a multi-dimensional and penetrating assessment framework needs to be adopted. The review should not be confined to the surface of the disclosed information, but should be conducted in depth from the three dimensions of nature assessment, possibility assessment and impact assessment. Specifically: 1. Nature assessment: What type does this conflict belong to? Is it a direct conflict or an indirect conflict? Is it a real conflict or a potential one? Was his behavior intentional concealment, unintentional oversight or caused by changes in circumstances? 2. Possibility assessment: What is the actual probability of this conflict situation occurring? Are there any specific signs of behavior? What is the personal conduct and historical record of the executive? 3. Impact Assessment: Once a conflict occurs, what financial losses, reputation damage, legal liabilities and negative impacts may it cause to the company? Is it a quantifiable direct loss or an incalculable indirect damage?
Finally, the review stage needs to reach clear conclusions and provide grading suggestions. The review subject needs to issue four clear conclusions based on the assessment results: no conflict, low-risk conflict, high-risk conflict, and substantial damage has been constituted, and accordingly put forward suggestions for hierarchical disposal.
For low-risk matters (such as when a close relative of an executive holds a small stake in a non-core supplier and has no business impact), the disposal measures can focus on prevention and monitoring. For example, the executive may be required to make a written commitment to proactively avoid all decision-making processes related to this supplier. Record this situation on file and have the internal audit department pay attention to it in subsequent audits.
For high-risk matters (such as the possibility of competition between the enterprises founded by senior executives outside the company and the company's main business), strong intervention and corrective measures should be taken, for example: immediately ordering them to withdraw from the operation of the external enterprise or transfer their shares; Revoke their decision-making power to participate in related business. Adjust their job responsibilities when necessary and completely isolate the source of conflicts.
For extremely heinous matters that have caused substantial damage to the company or constitute serious fraud, disciplinary procedures must be initiated, including but not limited to: initiating internal disciplinary actions, pursuing legal responsibility in accordance with the company's articles of association and labor contracts, recovering unjust gains, and even terminating the labor contract and reporting the case to the public security authorities.
The Wang Teng incident, as a typical case of corporate executive fraud in recent times, reflects the concealment and huge harm of conflicts of interest. It not only erodes the core assets of enterprises and undermines internal fairness, but also may cross the red line of criminal offenses. Building a strict anti-fraud system, especially an effective prevention and control mechanism for conflicts of interest, has become a rigid demand for modern enterprise governance.
Corporate anti-fraud needs to be integrated into the daily management of enterprises. It requires the organic combination of clear institutional norms, smooth declaration channels, independent review mechanisms and decisive handling measures to form a complete closed loop of prevention in advance, monitoring during the process and accountability after the event. By continuously strengthening the promotion of compliance culture, we guide all employees to deeply understand and voluntarily abide by the regulations on conflicts of interest, fundamentally building a solid defense line, minimizing management risks to the greatest extent, protecting enterprise value, and laying a solid compliance foundation for the stable operation and sustainable business development of the enterprise. This is not only an inevitable requirement of modern corporate governance, but also a manifestation of responsibility towards shareholders, employees and even the entire market ecosystem.
