Nvidia has launched an independent investigation after reports that its founder and CEO was targeted by a foreign intelligence operation in the guise of a relationship, and Huang has even admitted to being unfaithful to his wife, but the board's inquiry goes beyond his personal conduct. Can teh chipmaker's board remove Jensen Huang as CEO after the controversy surrounding his relationship with an executive linked to a company under scrutiny over alleged diversion of AI chips to China?
For context, the woman at the centre of the reports, Alice Huang, was an executive at Singapore-based Megaspeed, a major Nvidia customer that has purchased more than $4.8 billion worth of Nvidia chips over two years, as per media reports. US intelligence agencies, however, believe she was gathering information for Beijing. Authorities have also suspected that some advanced chips bought by companies linked to Megaspeed may have been diverted to China, which is in direct breach of US export controls. However, these allegations have not been established publicly.
Then, Nvidia's board announced the investigation on November 8, saying that a committee of independent directors, along with external legal counsel, would examine the information that is available. The board also said that it had no reason to believe that national security or Nvidia's trade secrets had been compromised, while also expressing confidence in Huang and said he would continue as CEO while cooperating with the inquiry.
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But can Nvidia's board remove Huang as CEO?
The short answer is yes. Under Nvidia's amended and restated bylaws, dated March 12, 2024, any company officer can be removed with or without cause through the affirmative vote of a majority of directors in office. The provision, then, gives the board the authority to remove Huang from his executive position without requiring a criminal finding or conviction.
Removing him as a board director, however, is a separate process. Nvidia's bylaws provide for director removal with cause through a majority shareholder vote, and without cause through a vote representing at least 66.67% of the company's outstanding voting power.
What do past CEO exits show?
There is no dearth of examples of companies removing chief executives over personal relationships that have violated internal policies.
Intel CEO Brian Krzanich resigned in 2018 after the company found that a past consensual relationship with an employee breached its non-fraternisation policy. And in 2019, McDonald's fired CEO Steve Easterbrook after finding that a consensual relationship with an employee violated its standards of business conduct. The company later discovered that he had withheld information about other relationships during its investigation. The US SEC then charged him with misleading investors about the circumstances of his departure.
However, the circumstances at Nvidia are different. Alice Huang was an executive at an external company, not a Nvidia employee, and the company has not announced any finding that Huang violated its policies or compromised confidential information.
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