Chip designer NVIDIA Corporation has vastly increased its spending on providing security to the firm’s founder and chief executive officer, Mr. Jen-Hsun Huang. Mr. Huang is one of the longest-serving CEOs in the technology industry and is among the few who remain in charge of a company they helped set up. The details were revealed in NVIDIA’s annual report to shareholders, and it shared complete details of the executive’s compensation along with those of other board members and directors.
NVIDIA Chief Owns 3.5% Of Firm’s Shares, Most Of Which Are Held In Trust – Total Comp For 2023 Was $21 Million
NVIDIA’s journey on the stock and the consumer market has been filled with ups and downs over the past twelve months. The firm, like others, had to deal with a slowdown in the personal computing market as inflation sapped purchasing power. However, for NVIDIA, the fall in cryptocurrency prices also harmed the company, as its bread-and-butter gaming market was disrupted due to reduced demand and second-hand products being available in large numbers.
However, the close of 2022 saw historic hype around the artificial intelligence chatbot ChatGPT. After NVIDIA’s role in powering and training the platform was revealed, the firm’s shares surged on the stock market, particularly after analysts speculated on the disruptive nature of the technology. ChatGPT became a saving grace for a firm whose revenue remained flat annually in its fiscal year 2023 and non-GAAP profit dropped by 25%.
The low revenue has also hurt Mr. Huang and other NVIDIA’s top management members. Their compensation for 2023 is divided into base salaries, variable cash bonuses and other payouts linked to revenue growth. The baseline threshold for the cash compensation is $29.6 billion in revenue; for specific share units, a non-GAAP operating income of $13.2 billion is the threshold.
Since NVIDIA’s revenue and operating income of $9 billion were below these thresholds, no executive was entitled to a cash bonus in 2023. For Mr. Huang, this amounted to a loss of $1 million. For other executives, such as the firm’s chief financial officer Ms. Colette Kress and its executive vice president of worldwide field operations, Mr. Ajay Puri, the cash bonuses would have ranged between $150,000 for the CFO and $325,000 for the operations lead.
Interestingly though, while Mr. Huang’s overall compensation dropped during NVIDIA’s latest fiscal year, the amount the firm spent on his security grew by a whopping 756%. These expenses stood at roughly seven hundred thousand dollars during the latest fiscal year, with $669,005 being for security and the remaining payments to his pension plan.
Commenting on the need to beef up Mr. Huang’s security, NVIDIA’s annual report outlined:
Consistent with prevalent practices among large, multinational companies, and in accordance with the executive security program established by our Board based on an intended third-party security assessment, NVIDIA provides our CEO with personal security protection. We require that authorized personnel be present at Mr. Huang’s residence, and that Mr. Huang be driven to and from work, and to and from business meetings, by a security driver in a car leased by NVIDIA, or by an authorized car service. We also conduct ongoing third-party assessments to monitor and help determine Mr. Huang’s overall security needs.
We do not consider these additional security arrangements to be a personal benefit to Mr. Huang because they arise from the nature of his employment responsibilities and the related costs have been incurred as required by the Board’s executive security program. However, they have been disclosed in compliance with SEC rules in the “All. Other Compensation” column of the Summary Compensation Table below In Fiscal 2023, the cost for Mr. Huang’s security arrangements included (i) residential security, (ii) security monitoring services, and (iii) the down payment and monthly expenses for a car leased by NVIDIA.
We believe these arrangements are reasonable, necessary and in the best interests of NVIDIA and its stockholders, as they enable Mr. Huang to focus on his duties to the Company while ensuring that he and his family members are not exposed to security threats. The CC has implemented an annual process to provide oversight of the nature and costs of executive security measures. In evaluating potential perquisites, we consider the cost to the Company relative to the perceived value to our executives, as well as other corporate governnace and emoloyee relations factors.
