When the captain of the ship becomes a liability

MUMBAI: When people at big firms get sacked, they resign

MUMBAI: When people at big firms get sacked, they resign. Officially, Jensen Huang was not sacked either. He resigned. The head of Nvidia, whose chips sit under much of the world’s artificial intelligence, admitted an affair with a woman US intelligence reportedly suspects of working for China. What choice did he have?

By Monday in India, memes on WhatsApp and Instagram started to generate cheap laughs. Because Jensen Huang was chief executive of a company roughly worth $5 trillion. What happens to a company whose technology powers much of the world, its boss has becomes a liability, and the board must act?

Let’s begin with the chronology: On Sunday, Huang wrote to his staff: “There is no excuse for what I did.” That night his board said it had confidence in him. By Wednesday, a second relationship had surfaced. The board met late that night. And on Thursday, Huang resigned. The board thanked him for his “immeasurable contributions.”

Now, look at the verb. Satish Pradhan, who headed human resources at Tata Sons and sat on the board of NPCI, has seen this film before. Often enough to describe such a resignation as a “Negotiated resignation.” What it means is, you sack someone for cause, with a stated reason, and the benefits that can accrue to them vanishes. This include ‘Clawbacks’, a clause that lets a company take their bonuses back. And the dismissal becomes something a court can examine. Litigation is messy for everyone. The softer option then is ‘resignation’.

That’s what happened at Nvidia. The board “backed” him until the markets punished the company.

India has witnessed such experiments often enough, sometimes on the same man. In 2002, Phaneesh Murthy, an Infosys director and its global sales head, resigned after a former secretary sued him and the company for harassment. He denied it. Infosys paid him $570,000 in dues and settled the suit for $3 million, of which half was paid by its insurers. In 2013, as CEO of iGate, Murthy was terminated for failing to report a relationship with a subordinate. Outside counsel found no breach of iGate’s harassment policy. He sued, claiming about $17 million of withheld stock. By 2015, iGate had booked a $4.6 million charge for legal settlements, reportedly paid to him.

Read that again: At Infosys, insurers paid the woman who sued. At iGate, the company, reportedly, paid the man it sacked.

So, as things are at Nvidia, all we know is, the filing says: the board has accepted Huang’s resignation. It gives no reason. It has not disclosed the terms. What his contract allows, what he keeps, whether the inquiry that began on Sunday can still change, none of it is public. The shares he already owns are his, whatever the current verb is—resigned or terminated. The rest will be decided by the people who picked it.

Biju Dominic, author of ‘MicroStimuli,’ adds a twist to the drama. His research with his team suggests humans continue to thrive because the brain can forget. Forgetting is how people recover from embarrassment, failure and old mistakes. Technology, social media above all, has reached a point where it does not allow forgetting.

To place that in perspective, the Wall Street Journal reported that in May, a New York short seller, Culper Research, a firm that profits when a stock falls, posted a 40-page report on what it called Nvidia: “The China problem.” It read “We are short Nvidia and think shares are headed lower.” The press largely ignored the report. But that was six months ago.

The irony, Dominic says, is hard to miss. The head of a company that powers technology and AI was first flagged by technology, because the images were online. Nobody could make them go away.

Before Sunday, Huang had called his dealings with Alice Huang “completely normal and not unusual.” On Sunday: “There is no excuse for what I did.” In a world that no longer forgets, the first version could not hold.

Now the part nobody in that boardroom wants asked. On Sunday, the room knew. Huang had acknowledged the affair to the board. The board knew what the New York Times had written about the woman. It said it had confidence in him anyway.

One man has resigned. The ten directors who backed him that night are still in their seats. On average, they have sat on that board for 15 years, “nearly twice as long as the average S&P 500 director”.

Why are they still there?