How should corporations prepare for leadership and financial contingencies?

Your company's leading edge is tied to the skills of key people-innovators, managers, relationship builders. Their loss can be difficult to quantify because so many components of the business will be affected. It is more than replacing a job function-consider the loss of . . .

  • Sales revenues, market share, and client goodwill
  • Proprietary knowledge and systems
  • Production capacity and cash flow
  • Credit standing with lending sources and suppliers
  • Time and money to recruit and develop replacements

And what would losing the Number One key person-the owner-mean? You may have buy-sell agreements in place, but have they lost their effectiveness because circumstances or assumptions changed while no one was keeping track?

Questions CEOs and CFOs should ask to mitigate the company's risks.

1. How do we define the added-value we offer our customers? Which employees control it? What are the risks to the company in losing them?

2. What is our ideal competitive position? What key people are we depending on to get us there and keep us there? What are the risks of losing them?

3. How has our corporate philosophy evolved? Who defines it? How important is that person to the company's success? What would losing him or her mean?

4. If key shareholders were unexpectedly gone, who would control the company? Could buying out inactive shareholders drain our earnings or impede our growth?

5. Does the buy-sell plan take into consideration . . .

  • The survivors' cost basis?
  • Creditors' rights?
  • Ratio of ownership desired after buy-out?
  • Tax brackets of owners and corporation?
  • Number of shareholders, differences in ages and stockholdings?
  • Certainty of performance or unreasonable accumulation of surplus?
  • Constructive ownership?
  • Corporate AMT?
  • Policy maintenance and stockholders' right to acquire policies?
  • Rights to excess funds and contingencies for insufficient proceeds?

The decision process begins with the right questions.

Corporate contingency strategies

Employee benefits strategies

Retirement plan strategies

Executive benefits strategies

Corporate lifetime settlements

Family business strategies

Personal financial strategies

Individual lifetime settlements

Legacy planning strategies

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