Nvidia’s crisis has corporate governance experts reaching for the popcorn

Nvidia's stock fell 9.5% over two days following revelations that CEO Jensen Huang had an extramarital affair with Alice Huang, a former executive at Nvidia customer Megaspeed whom U.S. intelligence suspects of spying for China. The board hired law firm Wachtell, Lipton, Rosen & Katz to investigate. Corporate governance experts Ann Lipton and Todd Henderson note there is no precedent for a CEO caught in a suspected honeypot. The investigation will examine whether laws or internal policies were broken and whether the board was misled, including when Huang learned of the espionage suspicion. Huang hired a crisis PR firm a year ago, but it is unclear if that was due to the affair alone. Shareholder suits are expected, particularly securities fraud claims alleging Nvidia misled investors about its Megaspeed dealings. A mismanagement derivative suit under Delaware law is harder to bring. The board's loyalty to Huang and lack of a succession plan raise governance concerns, as does Huang's children working at the company. However, Nvidia's single-class share structure gives the board more flexibility than if Huang controlled voting shares.

(Source：TechCrunch)