This “close personal relationship” has led to the downfall of a number of business leaders over the years.
Now it is Jensen Huang, the founder and CEO of Nvidia, who has fallen. Mr. Huang resigned Thursday following revelations that he was having an affair with a company executive as well as a woman who U.S. intelligence agencies said was an asset to Chinese intelligence.
Posing a national security risk is not the usual reason for ousting a chief executive. More often than not, this is a relationship that is against company policy.
Large companies typically have policies in place prohibiting managers and direct reports from having romantic relationships. Nvidia’s code of conduct tells employees to “avoid situations where our actions create conflict,” including “personal relationships.”
“When it comes to direct reports, companies have had strict policies and have done so for ages,” said Charles G. Tharp, executive vice president of the CHRO Association, a group of human resources executives.
Tharp added that companies have likely stepped up enforcement of these policies in the wake of the Me Too era.
Mark Hurd, who helped build HP into a leading technology company, was fired in 2010 after his board found that he failed to disclose the use of company funds and had a “close personal relationship” with a contractor. In 2018, Brian Krzanich resigned from Intel after the chip company became aware of a “past consensual relationship” between the CEO and an employee.
Technology isn’t the only industry affected by the scandal. Last year, Ashley Buchanan was fired from his job as chief executive of Kohl’s, the department store chain, after the company learned he was trying to steer his business to a salesman who turned out to be his romantic partner. Mr. Buchanan only held this position for a few months. Rodney McMullen, the chief executive of the Kroger grocery chain, resigned last year after an investigation by his board found that his personal conduct was not consistent with company policies.
McDonald’s endured an unusually public battle that lasted years starting in 2019. That year, the company fired Steve Easterbrook, its chief executive, after its board learned that he had engaged in a consensual relationship with a subordinate that violated company policy. Eight months later, another McDonald’s employee reported having a prior sexual relationship with Mr. Easterbrook. McDonald’s then sued Mr. Easterbrook, accusing him of lying and concealing multiple relationships with McDonald’s employees. The case was settled and Mr. Easterbrook apologized and returned more than $105 million in cash and stock to the company.
In 2018, Leslie Moonves, longtime CEO of CBS Corporation, was one of the most high-profile entertainment figures to be ousted from his position during the #MeToo era. He resigned after several women accused him of sexual harassment. Mr. Moonves did not receive any severance pay.
Following Mr. Moonves’ ouster, the CBS board also named six new members.
Boards of directors are responsible for monitoring the conduct of their executives and ultimately deciding whether a CEO should resign.
The founders of highly successful companies – like Mr. Huang – are often treated with deference by their boards of directors. “They’re impressed with their founder for very good reasons,” said Jeffrey Sonnenfeld, a professor of leadership studies at the Yale School of Management and author of “The Hero’s Farewell.”
In Nvidia’s case, he said, “the board did the right thing, but it took too long.”
“There were plenty of indicators for any board to pay attention to,” he added.
Other founders were fired due to their temperament or management style and ended up returning to the companies they built. In 1985, Steve Jobs was forced to leave Apple after an internal power struggle and a disastrous rollout of new technology. In 2000, he returned and had a legendary career as CEO of Apple. Sam Altman, the chief executive of OpenAI, has had less time away from his artificial intelligence empire. He was forced out by the board on a Friday afternoon in 2023. Five days later, he was reinstated as head of the company after allies, including Silicon Valley executives, employees and investors, called for his return.
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