Nvidia scandal magnifies serious board defects

NVIDIA

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The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Robert Cyran
NEW YORK, Nov 9 (Reuters Breakingviews) - Nvidia NVDA.O is the backbone of the AI boom, but the boardroom could use a stiffer spine. Founder and CEO Jensen Huang almost single-handedly made his chipmaker the linchpin of the planet's biggest-ever infrastructure investment spree, catapulting it to the world's most valuable company. His extramarital affair with a possible spy for China exposes glaring governance defects, however, and puts the entire industry at risk.
Under Huang, Nvidia has generated a 36,000% total return for shareholders over the past two decades. His fingerprints are all over the technological, manufacturing and financial success. He turned the PC graphics cards producer into an AI powerhouse, boosting growth through clever software investment and acquisitions such as Mellanox Technologies, which entrenched its goods even more deeply in data centers.
As former French President Charles de Gaulle is credited with saying, however: “Cemeteries are full of indispensable men." In other words, every organization needs a plan, just in case something happens to the person in charge. Huang may survive corporate and congressional probes into his romantic relationship with businesswoman Alice Huang, who US intelligence agencies suspect of spying for China's Ministry of State Security, but it will be a major distraction with all sorts of personal and professional repercussions.
Nvidia's boss already shoulders a heavy burden underpinning the AI complex, supplying it with both graphics processing units and funding. Huang oversees 60 direct reports, and told podcaster Joe Rogan that he probably reads several thousand emails a day. There’s no clear number two to help out either. The company says the dozens that Huang manages provide a pool of excellence to tap. His four top lieutenants are all executive vice presidents; none is denoted as being a successor.  
Moreover, Nvidia's board bizarrely has no chairperson. Huang is the only director the company deems to have all eight necessary skills, competencies and attributes, including in “regulatory, legal and risk management." The charitable explanation is that the company has been on so good a roll for so long that there was no need to worry about such pedestrian concerns. The scandal now makes the omissions look clownish.
Credible oversight is now an urgent priority. The board did appoint an independent committee to investigate Huang's affair, but its credibility is weak. A strong and respected chair would help shore up the group of venture capitalists, consumer goods executives and other semi-relevant directors presiding over Nvidia. 
Someone stoic from outside the tech industry, with international experience and skilled in handling big numbers and personalities — in the mold of, say, former Fed Chair Jerome Powell or former Morgan Stanley CEO James Gorman — makes sense. Once there's a dependable person in charge, the belated planning can start for life beyond Huang.
     
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CONTEXT NEWS 
Nvidia's board of directors said on ​November 8 that it is initiating an independent ​investigation ⁠into whether founder and CEO Jensen Huang has been the target of a foreign intelligence effort.
Huang apologized for being unfaithful to his wife and said he was committed to winning back the confidence of Nvidia's board, partners and shareholders. The company added that he ​is committed to continuing to lead Nvidia as CEO without interruption.
US authorities suspected Huang had ​a romantic relationship with ⁠a Chinese woman who was recruited to spy for China’s Ministry of State Security intelligence agency, the Financial Times reported on November 6, citing unnamed sources. A memo based on information from US intelligence said the Nvidia boss had been involved with Alice Huang, who was at the time an executive at Megaspeed, a Singapore-based customer, the report added.

(Editing by Jeffrey Goldfarb; Production by Maya Nandhini)
((For previous columns by the author, Reuters customers can click on CYRAN/robert.cyran@thomsonreuters.com; Reuters Messaging: robert.cyran.thomsonreuters.com@reuters.net))