Jensen Huang has remained at the helm of Nvidia despite a scandal. But he only owns 3.6 percent of the shares and no veto power. So what power do investors and boards of directors have when the CEO becomes a liability?
For decades, to Wall Street, Jensen Huang seemed to be Nvidia - and Nvidia Jensen Huang. But the investigation by the US Federal Police FBI into an affair with a suspected Chinese spy has shaken the statics of the world's most valuable semiconductor company. Despite public support from Donald Trump and tech entrepreneurs like Elon Musk, analysts and major investors are quietly asking themselves a question that seemed unthinkable just weeks ago: How could the manager even be forced out of his position?
A look at US corporate law and the political structure in Silicon Valley shows: Huang is legally more vulnerable than his omnipresence would suggest.
The board of directors could overthrow Huang
Formally, the decision about the future of a CEO lies solely with the Board of Directors. According to Nvidia's statutes, the supervisory board can remove the CEO at any time and without giving reasons by a simple majority. With the exception of Huang himself, the board is predominantly made up of independent directors.
If the special internal investigation reveals that Huang lied to the board about the nature of the contact - as suggested by initial company denials that spoke of ordinary customer contacts - the directors will be forced to act. If they protect a CEO who has misled the board and thereby trivialized potential espionage risks, the board members will, in the worst case scenario, be personally liable to the shareholders. In practice, separation in such cases rarely occurs through open termination, but rather through an unambiguous request for voluntary resignation.
Shareholders can build pressure
On the trading floor, Huang's structural weakness compared to other Silicon Valley founders becomes particularly clear. While tech managers like Mark Zuckerberg or Google founders Larry Page and Sergey Brin have unassailable control over their companies via multiple voting shares, Nvidia has a strict principle: one share, one vote.
Huang holds around 3.6 percent of the company's shares. Although he is the largest individual private shareholder, he does not have any veto power. The actual power in the general meeting lies with institutional owners: fund companies such as Vanguard, BlackRock and State Street together control more than a fifth of the voting rights. While shareholders cannot fire the CEO directly, they have significant influence on the board of directors.
The route via stock market supervision and criminal law
Neither judges nor the FBI can fire a manager just because they dislike his private behavior. Nevertheless, the US legal apparatus has drastic tools: If the US Securities and Exchange Commission (SEC) comes to the conclusion that Nvidia deceived the market through misleading denials or late ad hoc announcements, it can initiate impeachment proceedings in federal court. Such an officer and director bar prohibits an executive from being the head of a publicly traded US company for years or for life.
The criminal aspect would be even more serious: If the investigations by the Department of Justice (DOJ) provide evidence that the relationship intentionally or grossly negligently leaked confidential chip architectures or information in order to circumvent US export controls, an indictment for violating confidentiality obligations or export laws would be possible.
When the political mood changes
US President Donald Trump recently described Huang as a “fine person” and publicly supported him. But political loyalties in Washington are volatile. If the narrative takes hold in Congress that Nvidia's top man represents a security risk, the pressure to act will grow.
Politics has subtle levers: The US Department of Commerce decides on the lucrative export licenses for throttled AI chips to Asia and the Middle East, while security authorities oversee the awarding of government contracts and clearance levels. If the administration, as part of a bitter election campaign or a geopolitical exchange of blows with Beijing, threatens to cut Nvidia's licenses or Pentagon orders as long as Huang remains in office, the company would be faced with a choice: loyalty to the founder or the continued existence of the global business model.
Why no one is indispensable
The argument that Nvidia would not be able to survive without its founder will only appeal to the markets as long as the economic benefits outweigh the political and legal risks. Tech history proves that even the most colorful founding figures are replaceable. When Apple co-founder Steve Jobs, who was suffering from cancer, handed over leadership of the iPhone company to Tim Cook in 2011, Wall Street feared the abrupt end of the company's innovative strength. But the cool logistics expert Cook transformed the cult company into a global consumer goods machine and multiplied its stock market value to a record level.
Microsoft also survived Bill Gates' painful withdrawal at the turn of the millennium, which was overshadowed by antitrust proceedings: After a phase of stagnation, Satya Nadella transformed the company into a highly profitable cloud giant.
