How Adventurous is your CEO?
The Death of Steve Appleton and its Effect on Other Companies
Legally, CEO’s are not obligated to disclose hobbies to their company’s board of directors. However, with the recent death of Micron’s CEO, Steve Appleton, board members are becoming more concerned about being left in the dark. Appleton perished when the private small-engine plane he was piloting crashed in February. Directors and shareholders alike are wondering if their CEO’s also partake in risky hobbies. Future plans of expansion and investment are instantly delayed if the key leader suddenly cannot continue to work in their normal capacity. Meanwhile, businesses without a succession plan in place will undoubtedly suffer financial troubles should they unexpectedly lose their top executive.
“The Micron tragedy should be a wake-up call for boards,” says William M. Mower, a partner at law firm Maslon Edelman Borman & Brand LLP. The board of directors relies heavily on their CEO to protect and grow their investment firm. If the CEO could die at any moment because of some risky activity, the board deserves to know about it. However, since executives are not legally required to disclose this information, stakeholders in a company need to find another solution.
A board of directors was not entirely sure of their CEO’s hobbies, but was aware of his desire to race sailing yachts. Before his employment, this particular CEO had participated annually in the America’s Cup. During one race, the conditions were so treacherous that seven sailors perished on various boats. Afraid of suddenly losing their key component to the company, the board of directors decided to purchase key person coverage on their Chief Executive worth $10 million. The policy is structured so the company is named as the owner and beneficiary, meanwhile the CEO is named as the insured.
Companies can utilize coverages such as Key Person Insurance; buy sell insurance and critical asset protection to protect their investments in human capital on a worldwide basis.