In the U.S.-China Tech Race, Corporate Governance Is the Weak Link
Intel’s deepening ties with China expose a broader failure in U.S. corporate governance and fiduciary accountability. America’s geopolitical future increasingly hinges on private technology, with corporations wielding influence that was once reserved for nation-states. Among many examples, Intel stands out as a case that vividly illustrates the risks posed by outdated governance standards. Once a national champion, Intel is now at the center of high-stakes global competition. However, the troubling trend of corporate boards prioritizing short-term profits and international entanglements over long-term national security cannot be ignored.
Intel’s trajectory has recently been under scrutiny, particularly highlighted by Sen. Tom Cotton’s letter questioning CEO Lip-Bu Tan’s ties to China. This scrutiny is further intensified by the administration’s calls for his removal. The company’s extensive yet legal investments in China shine a light on how U.S. corporate governance standards have struggled to keep pace with modern challenges.
Strategic Missteps and Board Complicity
Once a leader in the American semiconductor industry, Intel received $19.5 billion through the CHIPS and Science Act aimed at revitalizing domestic chip manufacturing. However, while the U.S. produced nearly 40 percent of the world’s semiconductors in 1990, today’s figure is less than 12 percent. Taiwan dominates over 60 percent of global supply, with over 90 percent of cutting-edge chips manufactured there. Despite its potential to reverse this trend, Intel’s strategic missteps and deepening ties with China have undermined its efforts.
Despite guidance from the CHIPS Act discouraging such activities, Intel’s venture arm invested in at least 43 Chinese A.I. and semiconductor startups—more than any other U.S. firm. The company also invested over $1.5 billion into Tsinghua University, a top-ranked institution tied to the Chinese military. These decisions, far from being accidental, were board-approved strategies involving figures such as Lip-Bu Tan and Jim Goetz, who are linked to firms named by the House Select Committee on the Chinese Communist Party as technology transfer facilitators.
Intel’s dependence on Chinese revenue, comprising 29 percent of its global earnings in 2024—with a significant portion from Lenovo—illustrates the broader risks of its strategy. The same year, Intel laid off 15,000 employees and lobbied Congress to ease investment restrictions, with reported connections within the Treasury department aiding in their efforts. This raises questions about a taxpayer-funded enterprise leveraging influence to resist safeguards intended to strengthen U.S. industry.
Delaware’s Fiduciary Duties: A Short-Term Focus
Corporate boards are designed to preserve long-term value, yet their effectiveness depends on independence. Many major tech companies have governance structures—like supermajority voting rules and dual-class share setups—that concentrate power in the hands of CEOs, limiting boards’ ability to provide meaningful oversight. This undermines confidence in boards as checks on executive authority, exemplified by Intel’s governance.
Statistics from recruiting firm Spencer Stuart reveal that 39 percent of Fortune 500 CEOs serve for less than five years. This fosters a culture of “short-termism” driven by immediate financial results rather than long-term value, compounded by leadership changes that offload consequences onto successors. Delaware law, overseeing most U.S. public companies, prioritizes shareholder value in the shortest timeframe, often neglecting longer-term competitiveness and national security.
Incidents like AMD’s semiconductor transfer to China, structured to evade CFIUS review, demonstrate a legal but damaging precedent. Such loopholes allow corporate boards to prioritize immediate profits over national security, guiding decisions contrary to America’s strategic interests, as seen in Intel’s example.
Broader Instances of Technology Transfers Under Duress
China utilizes global capital markets not solely for financial returns but also as strategic tools to acquire foreign intellectual property. Many cases reveal unauthorized transfers of sensitive technologies, particularly affecting smaller firms and startups during negotiations or due diligence phases. Larger technology companies face similar challenges, with China leveraging governance weaknesses and pressure for short-term results.
U.S. firms sometimes agree to share proprietary technology for continued Chinese market access—a practice criticized as “forced technology transfer” by various industry groups concerned about irreparable harm. This strategy, part of China’s industrial policy, sees U.S. corporations in sectors like biotech and semiconductors risking long-term competitiveness for short-term gains.
The Case for a New Governance Paradigm
The Revlon standard of review, crafted in a bygone era, ignores today’s geopolitical reality. Multinational corporations in strategic sectors are geopolitical actors whose decisions impact national power. A new governance paradigm could involve several key measures:
- Incorporate National Security into Fiduciary Responsibilities: Boards should evaluate geopolitical risks, particularly in strategic sectors and public funding scenarios.
- Limit Conflicted Board Memberships: Prohibit directors with significant investments in adversarial nations from serving on critical industry boards to avoid conflicts of interest.
- Strengthen Oversight for Federally Subsidized Companies: Companies receiving substantial federal subsidies should undergo independent national security audits and pre-deal reviews of foreign partnerships.
- Establish Personal Liability for Directors: Introduce accountability for directors whose decisions threaten technological sovereignty, potentially forfeiting stock awards or bonuses.
- Create Technology and Security Committees: Similar to SEC mandates, require subcommittees focused on cybersecurity, IP protection, and national security exposure in key industries.
- Establish a Government Oversight Body: Create a nonpartisan oversight mechanism to review corporate decisions with national security implications, ensuring consistent enforcement of fiduciary standards.
During the Cold War, trading secrets with adversaries would spark outrage. Today, boards like Intel’s can pursue similar activities without legal repercussions, highlighting a pressing issue: outdated corporate governance standards. By ignoring the stakes of modern competition, these standards downgrade long-term security to an afterthought. Intel’s decisions, supported by outdated frameworks, represent a voluntary surrender of technological edge and underscore the urgent need for modernized fiduciary responsibilities.
While patriotism cannot be legislated, responsibility can—and should—be mandated to safeguard national interests in the rapidly evolving global tech landscape.
