Nvidia's Jensen Huang should have known better

Nvidia Corp. chief executive officer and cofounder Jensen Huang has discovered that when you’re probably the world’s most important CEO, what could be considered a personal lapse in judgment for most can quickly spiral into a corporate crisis on a global scale.

This should not have come as a huge shock: Huang should have known that there is no such thing as a private life at his level. But his recent admission that he had an extramarital affair with a suspected Chinese spy has repercussions that extend far beyond Huang and the company he runs; it threatens to inject a new level of uncertainty into the entire artificial intelligence ecosystem.

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The stakes in Huang’s case might be massive, but the underlying issue is nothing new. Even amid the #MeToo backlash and corporate retreat from DEI, CEOs not mixing romance with business is one area where boards have largely stood firm. If you are the big boss, an affair with a subordinate or an undisclosed relationship with a business associate is a good way to get yourself axed. (See: McDonald’s Corp., Norfolk Southern Corp., Nestle SA, Kohl’s Corp.) And that’s doubly true if you lie to your board about it.

This really has nothing to do with companies adhering to some sort of new moral clarity. It’s purely a business decision. These kinds of misdeeds are taken as potential warning signs of bigger problems. The thinking goes like this: If a CEO is willing to break the rules in this one area of his life, where else would he be willing to break them? (And I use “he” intentionally here; the bosses embroiled in these scandals have been overwhelmingly men.)

The market is now questioning the judgment of the man who was supposed to be at the helm of the AI revolution. What makes the affair — and its potential implications for national security — even more damaging for Huang is the cultivation of his personal brand as the grownup in the room. He always tried to position himself as a steady, responsible hand amid the AI hysteria. To support that narrative, Huang often touted the importance of his family and especially his wife. (He apologized to them and his employees in a company-wide memo.)

Also read: Nvidia CEO Jensen Huang's personal affair matters far beyond than what meets the eye

Because of Huang’s prominence, he was clearly a target for potential espionage. But that’s something he should have known. He also should have known better than to dig himself into a deeper hole by initially publicly denying there was anything untoward about the relationship, saying their interactions were all “completely normal and not unusual.” In these cases, the truth always comes out. And now Huang has also raised the dicey question of what his board knew and when it knew it. As my colleague Dave Lee has noted, it seems unlikely that Huang, whose security detail costs $4 million a year, could easily sneak off for a rendezvous.

You don’t reach Huang’s level of success without a high degree of risk taking and rule breaking. These are traits we’ve come to celebrate in the business world and especially in tech. But this can lead to a dangerous cycle. As I’ve written before, power can make people think they will only ever reap the benefits of daring behavior. Studies have shown that people with a higher sense of power are more likely to believe they’ll avoid hitting turbulence on a flight or encounter a dangerous snake on vacation.

This is where a board comes in. As a CEO becomes more powerful, the more crucial it becomes for directors to send the message that leaders are not above the rules — that they’re not immune to the metaphorical snakes and turbulence. But we often see the inverse happening: A CEO’s success is viewed as a license to give more latitude rather than more oversight. (It’s worth noting that Elon Musk, the boss with perhaps the longest leash, has backed the argument that Huang is irreplaceable.)

There are signs Huang may have been given more and more free rein at Nvidia. The board seems to have no clear heir apparent for Huang, who has said he wants to continue in his role for decades. Bloomberg News has reported that Huang built “an informal organizational structure around him that eschews a conventional hierarchy. Instead, his direct reports are tasked with rapidly implementing his decisions.” That has “created a situation where there’s no replacement ready to step in and take over Huang’s relentless schedule.”

Also read: Nvidia CEO Jensen Huang could face major trouble when Democrats take control of Congress: Report

Now the public and investors are relying on this same board to report on the independent investigation it’s initiated. “While the Board has no reason to believe that either national security or NVIDIA secrets were compromised, the Board's inquiry will examine all available information,” it said in a statement. That sounds far too close to a conclusion for an investigation that has barely even begun.

Perhaps the board feels like it has no choice to say anything otherwise. Because Nvidia has built a multi-trillion-dollar company around one person, any threat to Huang risks the entire enterprise. Whatever the official investigation finds, the board should ask itself how it ended up in this position.