Charismatic CEOs can be a huge asset — until they’re not

The story dominating business and international news on Monday was Nvidia CEO Jensen Huang’s admission that he had an affair with a woman suspected of being a spy for China.

The company’s board has said it's launching an investigation into the matter.

This issue is complicated for Nvidia because its public identity is deeply intertwined with Huang. He has led the company since 1993 and has developed something of a cult following among investors. He’s also been close with President Donald Trump.

Having a CEO who is basically synonymous with a brand isn’t all that rare — especially in tech. It can be a good thing: it puts a human face on a corporation, according to Margarethe Wiersema, professor emeritus at The Paul Merage School of Business at the University of California, Irvine.

“A company is kind of abstract — like, who is McDonald's?” Wiersema said.

That company’s CEO is Chris Kempczinski — not a household name. But think Tesla or SpaceX — that’s Elon Musk. OpenAI — that’s Sam Altman. If a celebrity CEO resonates with the public that can generate more customers, Wiersema said.

Plus, CEOs matter to analysts who rate whether public company stocks are worth buying.

“When they evaluate these companies, the CEO is a large part of that valuation,” Wiersema said.

A CEO that investors are confident in can drive a stock price up.

But there’s also a lot of risk in tying a company’s fortune to one person. Attitudes among the public and investors can change.

“In the past, maybe you have a CEO whose identity really kind of resonates with the customers or the broader community, but that doesn't necessarily mean that that's going to continue into the future,” said Yo-Jud Cheng, professor of business administration at the University of Virginia.

When the public turns on a CEO, and maybe it turns to competitors. Not great. The other risk is if something unexpected happens to that famous CEO — say, a medical crisis. Or they’re found to have had an affair with a suspected spy. Then what?

That’s why it’s important for corporate boards to do succession planning, Cheng said.

“I think it should always be kind of on the back of the board's mind of like, ‘Okay, who's next?’” Cheng said.

Anthony Nyberg, professor of management at the University of South Carolina, said that the best practice is for a board to push company leaders to identify top talent within their ranks.

“And make sure that that talent is getting developed in a way that there is some optionality for the board for whatever might come in the long term in terms of future transitions,” Nyberg said.

That’s a difficult conversation with any CEO, Nyberg said. And the problem with celebrity CEOs is that they often gain more and more influence over their board.

“That makes it even more difficult for the board to push back and make sure that there's a strong successor leader in the pipeline,” Nyberg said.

The worst case scenario for a company is that a charismatic CEO gets pushed out and there’s no clear leader ready to take their place.