By Ross Kerber
Nov 10 (Reuters) – Revelations that Nvidia CEO Jensen Huang had an affair with a businesswoman suspected of being a Chinese spy have forced the chipmaker’s board to confront more than ordinary executive misconduct, raising existential questions for the company and concerns about the board’s ability to investigate its CEO independently.
Among corporate leaders, “There have definitely been affair scandals and sexual-harassment scandals. But honey-pot scandals? No,” said Ann Lipton, a University of Colorado law professor who follows boardroom issues.
She was using a term for an espionage ploy in which an operative entraps a target by feigning romantic interest. Historical examples include the Profumo Affair in the early 1960s and tend to involve diplomatic or political consequences.
US President Donald Trump said on Monday the FBI was probing Huang’s relationship, a day after Nvidia’s board launched an internal investigation “regarding the national security concerns raised in news reports,” according to an email Huang sent to Nvidia employees and released by the company.
The company’s advanced semiconductors are at the heart of a global race for AI superiority. China’s Foreign Ministry said the spying claim was “a groundless accusation, slander, and a smear.”
Nvidia co-founder Huang, 63, has no obvious successor and close ties to Trump. He owns 3.6% of its stock and has dozens of direct reports, suggesting a tight grip on the company.
Shares in Nvidia fell Monday as Huang’s future came under scrutiny. But the stock later trimmed its decline to close 4% lower as some investors bet that the CEO could survive the crisis.
BOARD’S CREDIBILITY
Unusually among its peers, Nvidia operates without a board chair among its 11 directors. While the company considers all but Huang independent, three independent directors have served since the 1990s and a fourth, Mark Stevens, for most of that time. Only two have joined the board since 2021.
The clubby roster may not be so unusual by the standards of charismatic Silicon Valley company founders like Apple’s Steve Jobs, who died in 2011.
But the US probe has heightened scrutiny of whether directors who have worked alongside Huang for decades are sufficiently independent to investigate his conduct.
“If you have a figure like Steve Jobs, I think people on Wall Street as well as in Silicon Valley would say they’re entitled to some leeway or deference,” said Marc Goldstein, head of US research for proxy adviser Institutional Shareholder Services.
Such deference could now raise questions about whether the board provided sufficient oversight of a CEO whose own judgment has come under scrutiny.
Nvidia said on Sunday that while its board had no reason to believe that either US national security or Nvidia secrets were compromised, its inquiry would examine all available information. The board said it had confidence in the CEO and his leadership team.
Goldstein said board members running that investigation should be given the latitude to hire their own legal advisers to bolster their credibility.
The company also might consider keeping long-serving directors away from the probe, he added, to avoid legal challenges from shareholders claiming it wasn’t sufficiently independent.
POLITICAL ECONOMY
Yale University management professor Jeffrey Sonnenfeld said the company faces additional national-security questions because of the ties between Huang and Trump. Trump, who has praised Huang, said on Monday that he had spoken to the executive and thought he would “be in good shape.”
Washington has imposed restrictions on exports of advanced AI chips to China since 2022. Last year the Trump administration allowed Nvidia to resume certain China shipments under arrangements in which the US government receives a cut of the company’s China chip sales.
The deal makes any suggestion of foreign espionage more sensitive for both executives and US government officials, Sonnenfeld said. “That’s why you don’t want state capitalism arrangements. You don’t want the US government to be so involved in private companies,” he said.
(Reporting by Ross Kerber; Editing by Christian Plumb and Cynthia Osterman)
