Nvidia founder Jensen Huang resigns after an overnight board meeting

By Sophie Lindqvist

On Thursday morning, Jensen Huang resigned as Nvidia’s founder and CEO after an overnight board meeting, triggering what the account called a rare three-part crisis in national security, corporate governance (board oversight) and markets.

The New York Times reported that Huang had an affair with a woman alleged to be a spy for the Chinese government and, separately, with a second woman on his team. The account said the allegations prompted the meeting and placed the departure after one of the most tumultuous weeks in recent business history. It treated Huang’s exit as unsurprising.

The report called him one of the era’s most famous and successful CEOs and forecast a surge of commentary about what Huang and his board handled wrongly. It asked how the fallout would affect customers, suppliers, employees and shareholders, and why there was no succession plan.

Why did the board not know, or intervene? How did Huang become so imperial as a leader? The rare trifecta, according to the report, was a national-security crisis, a corporate-governance crisis and a stock-market meltdown.

The account left the wider fallout unresolved. Shareholders were already absorbing a year-long decline that, according to the report, was accelerating by day.

Why did the board wait?

The source blamed a familiar Silicon Valley culture: the cult of brilliant, infallible co-founders, plus ownership structures that let public companies operate like private ones. Its warning was blunt. When one leader carries a company, concentration risk (dependence on a single person) becomes a fact rather than a slogan.

The report used another blunt comparison: “when you place all your chips on one person—one man—you’re placing all your chips on one man.” It added that men make mistakes like this one all the time. Its verdict was not subtle: “Jensen Huang started believing the hype about Jensen Huang.”

The report’s caveat was caveat emptor (Latin for “let the buyer beware”): scrutiny tends to disappear while the stock is booming. Its logic was that dependence becomes exposure when performance or conduct changes, leaving boards with a concentrated governance problem. The diagnosis, it said, required no outside legal analysis from Wachtell.

How did celebrity distort leadership?

Patrick Lencioni, a bestselling author and frequent Chief Executive contributor, examined the same dynamic in a column last August. His context was the Coldplay “Kisscam” debacle, which resulted in Coldplay CEO Andy Byron losing his job. Lencioni also wrote The Five Disfunctions of a Team and The Advantage.

Lencioni wrote: “It starts when they believe one particular lie.” The lie “centers around the importance and ‘specialness’ of being a leader.” He continued: “Of course, it’s largely fiction, or perhaps exaggeration.” “But it feels good, and it stands in starker and starker contrast to life at home.”

Lencioni said “If there is no understanding of the artificial nature of these good feelings,” then without “a strong moral and religious barrier” against “moving into intimacy,” “boundaries are crossed and Coldplay concerts happen.” “And families are devastated. And companies are damaged.” The account applied the warning to anyone who runs a company, including leaders and top performers.

What safeguards did Lencioni recommend?

Lencioni offered two pragmatic, rather than moralistic, safeguards for chief executives and their teams. Both targeted the private conduct that leaders otherwise excuse through status.

• First: “CEOs need to declare, for themselves and all the people they lead, that their marriages and families are more important than their businesses. They should say it out loud, frequently, and ask everyone to confront one another if they believe they might be losing sight of that.”
• Second: “they need to remind themselves that the admiration that they get from work is not necessarily love, but flattery, and that the applause they receive at work is no substitute for the love that can only be found at home.”

“In the end,” Lencioni wrote, “it needs to be recognized that leaders who are faithful at home are more grounded, trustworthy and effective in the workplace. Strong families and strong organizations go together.”

Lencioni was scheduled to lead an exclusive online masterclass for CEOs and their teams on December 2, although the session was not about this case. The source’s closing recommendation was equally spare: a good, independent board does not hurt.