Nvidia did not have a succession plan. Why?

Until this week, Nvidia had only ever had one CEO. Jensen Huang had served in that role since he co-founded the company more than 30 years ago. Now, Colette Kress, previously the company’s chief financial officer, will take on the head job while the company searches for someone to fill the role permanently.

It’s been widely reported that Nvidia had no clear succession plan. So,a big question is why wouldn’t a company have one?

If you’re on the board of a company, you’ve got one main job, said Santa Clara University management professor Jo-Ellen Pozner: “hire, evaluate, and fire the CEO.”

That includes planning for the next one. Pozner said one situation in which a board might not be actively doing that planning is when the company’s founder is also still its CEO — as was the case with Nvidia.

“And so there's a perception that that person can't be touched, right?” she said.

Some Silicon Valley firms have boards where the members have been around a long time or were early investors in the company, and they’re no longer a good check on company leadership, Pozner said.

“They cannot provide the kind of oversight and partnership that a CEO needs to be successful in the long term,” she said.

Also, good succession planning involves having other executives besides the CEO start to take responsibility and make decisions for the company, according to University of Pennsylvania law professor Jill Fisch. And sharing control can be hard.

“The CEO may not want to give up that much power or may just disagree,” she said.

Fisch added that it’s important to remember: Nvidia is not its CEO (even if it leaned into its CEO’s celebrity status), and it’s really the products a company makes that are crucial to its long-term success.