Eleven directors, one bylaw, no named successor: Nvidia's board meets

Nvidia’s board was meeting late on Wednesday, California time, to decide whether to remove chief executive Jensen Huang, a source told Reuters¹. The Wall Street Journal first reported that the company was preparing to replace him, and Bloomberg reported that the board had been working with an outside firm to identify potential successors, possibly including a temporary chief^1,4. Nvidia did not immediately comment¹. By 05:15 CET on Thursday, no decision had been announced.

How it got here. Huang acknowledged in a memo to staff on Sunday that he had been unfaithful to his wife; reports concern a relationship with a businesswoman whom US officials reportedly suspect of spying for China^1,3. On Wednesday the New York Times reported a second relationship, with an Nvidia executive who reported to him; Reuters could not verify it, and Nvidia and the executive did not immediately respond¹. On Tuesday the independent directors said they had retained former acting US Attorney Joon H. Kim and the law firm Wachtell, Lipton, Rosen & Katz to conduct an independent investigation².

The machinery. Under Nvidia’s bylaws, the chief executive can be removed “with or without cause” by a majority of directors; the board has 11 members, all but Huang considered independent¹. Huang, 63, owns about 3.6% of the shares, has dozens of direct reports and no obvious successor, Reuters reports¹. A fund manager quoted by Reuters named finance chief Colette Kress as a natural interim choice, while asking who would lead the technology roadmap longer term¹.

The price. Nvidia shares fell more than 8% in extended trading; if that holds, the company will have lost about $600 billion in market value since the board announced its investigation, Reuters calculates¹. Rivals AMD and Broadcom rose after hours¹.

For you. If you work in technology, this is a reminder that governance is a product feature. A board with a bylaw, an outside investigator and a list of candidates is doing its dull job; the lesson is to do it before the crisis, not during. Nothing here is investment advice.