Jensen Huang's Job in Jeopardy? Yale's Jeffrey Sonnenfeld Puts the Odds at 'About 50-50'

Nvidia Board Opens Independent Investigation

Nvidia's board announced Sunday that it is launching an independent investigation after CEO Jensen Huang told staff he was unfaithful to his wife. But this is not a case of just another CEO having an extramarital affair. The romantic interest is Megaspeed executive Alice Huang, whom U.S. officials believe is a Chinese spy who was feeding information back to Beijing.

The stakes reach well beyond Nvidia, given how many tech and financial partners depend on its place at the center of the booming AI economy. "I'm responsible for an entire industry," Huang recently told Bloomberg in a sit-down.

Beijing Denies Allegations as U.S. Concerns Mount

A spokesperson for the Chinese Embassy in Washington dismissed the allegations in late October as "groundless smears and slanders," and no one has been charged. But U.S. intelligence officials reportedly briefed President Donald Trump about their concerns a year ago, and unnamed senior officials inside the Trump administration told the Times that they doubt Huang could have remained unaware all that time of Alice Huang's intelligence-gathering role for China.

When Trump was first briefed, the Times reported, officials did not believe Huang knew, and it is unclear whether their assessment has changed. The board, meanwhile, says it sees no sign that national security or company secrets were compromised, and that Huang is staying on.

Sonnenfeld: Career Salvageable, but Odds Are Even

The question now is whether Huang can survive this. To think through what could come next, this editor spoke Sunday with famed professor Jeffrey Sonnenfeld, senior associate dean for leadership studies at the Yale School of Management and founder of the Chief Executive Leadership Institute, which has hosted Huang at its CEO summits.

Sonnenfeld likes Huang, he said, and he called Huang's career salvageable but put the odds at "about a 50-50." He also had a lot more food for thought.

Reputational Damage and 'Remarkably Poor Judgment'

First, the reputational damage. Until now, Huang has been "revered and trusted by everybody in technology," Sonnenfeld noted. But he called this episode "remarkably poor judgment." Even if Huang was merely naive, he said, "any employee in Nvidia other than him would be fired over this," and the recklessness alone would mean "an irretrievable loss of confidence."

Idiosyncrasy Credits: Huang's Possible Saving Grace

Sonnenfeld suggested that Huang's saving grace could be what social psychologists call idiosyncrasy credits—if he can prove he was being duped. The term comes from Edwin Hollander, a social psychologist who proposed in a 1958 paper that people earn latitude in a group by showing competence and following its rules.

Huang has been earning latitude since he co-founded Nvidia in 1993. But all that goodwill can run out when a screw-up looks self-serving or touches the group's core norms. Here that group includes Nvidia's board, its roughly 42,000 employees who are bound by security rules, and—in a looser sense—the U.S. government, given it restricts its exports.

No Clear Precedent for a CEO in Huang's Position

We also talked about precedents—except, as it turns out, there really are none. Executives who survive personal scandals usually pick up where they left off at another company, Sonnenfeld observed. Former HP CEO Mark Hurd is one example. Between 2005 and 2010, he turned HP into the industry leader by revenue, then was pressured to resign after he filed inaccurate expense reports that hid a personal relationship with a contractor. Oracle hired him about a month later.

Huang has no equivalent move to make because Nvidia is his company.

A Flat Structure and a Thin Succession Bench

As for the bench at Nvidia, that does not really exist either. While there is typically a hierarchy inside companies of Nvidia's scale and importance, Huang has kept things as flat as possible, with about 60 direct reports by his own account.

That structure makes it hard to figure out who would succeed him from inside (though his children, both of whom work at Nvidia, are sometimes the subject of succession speculation). That won't stop the worldwide guessing game that's sure to follow in the coming weeks. And boards in crisis often reach for a "mess..."

via TechCrunch AI