Nvidia, the world's most important supplier of artificial intelligence chips, discovered this week what happens when a company is built around one person and that person is suddenly gone. The company said on Nov. 12 that Jensen Huang had resigned as president, chief executive and director with immediate effect. Chief Financial Officer Colette Kress became interim CEO while keeping her finance job, and director Harvey C. Jones became the company's first chair of the board.

How Huang came to leave is a matter for the board's inquiry, which it has said is examining reports that he was targeted by a foreign intelligence effort. We take no view on his personal conduct, and the board has said it had no reason to believe national security or company secrets were compromised, according to Fortune. Our concern is narrower and, for investors in Asia, more useful: the structure that left Nvidia improvising its leadership in the week before quarterly results on Nov. 17.

A board built for a founder

The gaps were on the public record. Huang had run Nvidia for 33 years. The company had no chief operating officer and about 60 people reporting directly to him, Fortune reported, and no named successor. Jason Schloetzer, a Georgetown University professor who studies CEO succession, told the magazine the board "has made a mistake" by not having a clearly outlined plan.

Nvidia had no board chair at all, relying on a lead independent director. The Next Web reported that Huang, Jones and Tench Coxe had all sat on the board since 1993, that average director tenure was about 15 years, and that lead independent director Stephen Neal, who once ran the law firm Cooley and remains its senior counsel, oversaw a board whose main outside counsel has been Cooley since 1993. Fortune reported that Nvidia has had no chief compliance officer, and that SEC staff asked in 2022 about the board's risk oversight and the compliance officer's reporting line.

Nvidia's own annual report warned that a failure to ensure effective succession planning could hinder its long-term success, The Next Web noted. The risk was disclosed. It was not managed.

Asia has many Nvidias in miniature

Asia's technology markets are full of companies whose founders, or founding families, remain the strategy, the public face and the controlling shareholder. Huang, by Fortune's account, held 3.56% of Nvidia and had no super-voting shares. Many Asian founders hold far more, often through dual-class structures or family holding companies. That makes the problem harder, not easier: a board facing a sudden vacancy at the top may be facing it in the founder's own shadow.

Key-person risk is usually treated as a line in a prospectus. Nvidia shows it is a balance-sheet item. The stock fell more than 4% on the Monday after Huang acknowledged an affair, Fortune reported, and fell again after the resignation was announced, as we have reported.

What boards should do now

First, write a real succession plan, including an emergency one. An "emergency" plan that names nobody is a hope, not a plan. Boards of founder-led companies should identify at least one internal candidate who could run the company tomorrow and review the choice every year. If the founder dislikes the exercise, that is a reason to do it.

Second, separate the chair from the founder. Hong Kong's exchange already encourages listed issuers to consider an independent non-executive director as chair and, where the chair is not independent, to designate a lead independent director to strengthen communication among independent directors, the wider board and shareholders, according to HKEX's corporate governance guide. Nvidia's experience suggests a lead director is a floor, not a ceiling. Its board appointed a chair only after the founder left, as our profile of the board described.

Third, refresh the board. HKEX will cap independent directors' tenure at nine years, phased in from the first annual meeting on or after July 1, 2028, and tells issuers to plan replacements early. Other Asian exchanges should treat that as a minimum. Directors who joined with the founder may be loyal and expert; they are rarely the people who will challenge him.

Fourth, disclose more. Investors should be told how many people report directly to the CEO, whether there is a chief operating officer or designated deputy, who oversees compliance and to whom that person reports. These are cheap disclosures that would let shareholders price key-person risk instead of guessing at it.

None of this would have prevented the events that led to Huang's exit, and it is not meant to. Good governance cannot guarantee a leader's conduct. It can make sure the company does not depend on it. Nvidia's board will take its first public test on Nov. 17, when Kress presents third-quarter results. Asia's boards do not need to wait for theirs.