Insuring leaders: Larry Page’s solution?
Monday, June 25, 2012/
Larry Page, the co-founder and current CEO of Google, has lost his voice.
He’s missing a conference this week while he recovers from what he says is a nasty, but not life-threatening, illness. Page sent an internal memo to staff letting them know that “there is nothing seriously wrong with me,” and that he would “continue to run the company”.
Overkill for laryngitis? Perhaps. Investors and analysts were spooked by Page missing meetings at all, especially Google’s annual general meeting last Thursday. Now he has also conveyed he will miss the second quarter earnings announcement next month.
As the CEO of a public company he’s not entitled to his privacy, Jeffrey Sonnenfield, a senior associate dean at Yale School of Management, told the Wall Street Journal, adding that he should divulge more about his health issues. Business Insider probed Page’s absence, a reporter saying he recalled similar events in Steve Job’s last months at Apple.
For boards and leaders, it’s a fine line between privacy and the best in corporate governance. While not every sniffle warrants a market disclosure, it is understandable that the market is clamouring for more than a leaked staff memo to explain Page’s condition.
Like Jobs, Page’s role at Google is seen as important to the company’s success. But while the investor relations issues are complex, there are operational solutions to the absence of a key person in a corporation. One way to plan for the absence of a CEO is through the use of key man insurance.
Mark Femia, a divisional manager at insurance broker JLT Benefit Solutions, says large companies often use key person insurance (often called “key man insurance”) to provide stability and confidence in their ability to carry on if anything should happen to their key people, such as the CEO, or those in roles that are hard to replace.
Key man insurance has been around for quite a few years, but has changed with the times.
“Companies look at insurance a lot more these days,” he says. “It’s been around for awhile, but types of products – the different events and definitions – have been customised. Where previously it just covered death, now key man insurance has evolved to be more of a trauma and disability policy.”
Key person insurance is utilised by large and small companies. In large companies, things like brand damage that’s caused by the absence of a leader can be part of the equation, whereas smaller businesses have very different needs.
“Our clients range from ASX-listed companies to the one-man band,” Femia explains. “In large companies the CEO is insured for large amounts of money to provide stability and confidence. Whereas in really small companies it can just be about the lost income.”
“The client dictates the sums insured,” he adds. “It can cover everything. Trigger events are usually things like trauma, heart attacks, strokes, cancers or serious head injuries.”
So, would it work for Page? Unfortunately not, according to Femia. At least at this stage.
“Key person insurance is for quite serious events,” he says. “It’s more if he’s unable to work again, or in case of his death. If he died, that’s what the insurance was originally designed for. Now it’s broader, but it’s still not intended for a week or two off.”