Nvidia chief’s defenestration underlines the importance of governance ESG’s overlooked category, Ali Lyon writes in today’s Midday Markets newsletter.

At we pride ourselves on making the cross-pollinating worlds of business, finance, economics and wealth, fun. Indeed, so averse are our higher-ups to conforming to the industries’ love of complexity, jargon and – dare we say – pretence, that ‘business with personality’ has been the paper’s strapline for the entirety of its 21-year existence.

And so when, today, I suggested devoting this newsletter to the the subject of ‘governance’ I was met with more than a few raised eyebrows.

I’ll concede, 700 words on the processes and structures that a company implements to protect the long-term interests of its stakeholders doesn’t scream ‘business with personality’.

But this week’s defenestration of Jensen Huang – the scandal-hit co-founder of chip giant Nvidia – has thrust the thorny, unsexy issue firmly into the limelight, and thrown up some interesting talking points, to boot.

To many in the public and among some of the company’s shareholders, Huang was not the face of Nvidia; he was Nvidia. And for good reason: the leather jacket-toting, ever-energetic ‘AI rockstar’ had been both chief executive and president of the semiconductor colossus for more than 30 years.

He oversaw its evolution from niche computer-gaming chipmaker to the undisputed weathermaker of the AI evolution. And now, he’s gone, leaving a vacuum of leadership, not just at the world’s second-largest company, but at the heart of the most financially consequential industrial revolution in history.

This is, to borrow a technical phrase, not good. Nvidia’s shares are down 10 per cent since the start of the week, and 20 per cent in the past month. In one day, they shed more value than the total market capitalisation of HSBC, the FTSE 100’s most valuable company, all because of the poor judgement of a single, highly consequential individual.

UK Corporate Governance Code, I was not familiar with your game

The unseemly episode has laid bare the sheer amount of power and influence wielded by those at the top of the largest companies in history. In Nvidia’s case, Huang reportedly had up to 60 executives reporting directly into him at any one time. And despite the totemic founder’s multi-decade tenure, Nvidia’s toothless – and, until this week, chairless – board appears to have done next to no succession planning.

As Imperial Business School associate professor Dr Porneetha Luthra wrote in the pages of this week: “While charismatic’ leaders can seem intoxicating – admired, respected and sometimes loved – this is a very dangerous hierarchy.”

It’s worth noting that, had the same indiscretions been committed by any of the other founder-led tech giants, things would have been even worse. Meta’s Mark Zuckerberg, SpaceX and Tesla’s Elon Musk and Palantir’s Alex Karp are all, essentially, impossible to fire, thanks to the company’s dual-share structure.

And to a number, those emblematic entrepreneurs also personally own much more of the company than Huang’s 3.6 per cent. Just imagine the chaos had it been Elon Musk – who owns a fifth of Tesla and nearly half of SpaceX – who fraternised with an alleged Chinese spy.

In the good times, this concentrated power is a blessing. It allows for fast, bold decision-making unhindered by pesky shareholder votes and board oversight. When you’re dealing with some of the biggest brains in the world, who know their company and industry back to front – those decisions are more often than not, correct and lucrative. But either in – or in the run-up to – crises, robust governance is worth its weight in gold.

Which is why, today at least, we should be grateful for the UK’s rather old-fashioned approach. Thanks to the UK Corporate Governance Code, there is not a single FTSE 100 chief executive who also serves as chair of their company’s board (on the US’s S&P 500, more than four in 10 do). Under London-listing rules, any public company that allows its most senior executive to serve in both roles must explain its rationale to shareholders every year.

In a recent overhaul, the London Stock Exchange chose to water down some of its rules in what is, so far, a vein attempt to attract founder-led fintech and tech unicorn IPOs. But those changes don’t come close to mirroring the free-wheeling approach adopted by the bourse’s counterparts across the pond. And after this week’s Nvidious episode, that is probably no bad thing.