Apple recently released a ‘U.S. Securities and Exchange Commission report 2014' which highlighted Apples spend last year on protection for CEO Tim Cook. The amount in dollars totaled $774,000. This amount included the company paying $2,520 on life insurance and a further $699,133 on security expenses.
This may seem like a huge amount of money to spend, especially considering the amount Cook is believed to earn each year, but even Apple have admitted that this protection isn't for Tim Cook himself, "the Company provides home and personal security for Mr Cook because his personal safety and security are of the utmost importance to the Company and its shareholders.' This protection is for the business. In 2014 Apples total revenue was in excess of 128 billion dollars. Clearly protecting the companies CEO, the keyman [1] achieving these sums is very important.
The death of Apples CEO Steve Jobs in October 2011 caused shockwaves through the tech world and caused Apple's share price to fall by 5%. This was after Jobs had resigned from his position of CEO in the August. This is evidence enough of why the company feel it's necessary to protect its figurehead. What would have happened to the share price if Jobs hadn't resigned?
This is a question every business should ask themselves: What would happen if your businesses key person, main money-maker or figure head suddenly died or was diagnosed with a critical illness? Is your company protected?
Most companies don't realize the importance of their staff; in fact Legal and General completed a survey of SME's in the UK in 2012. They found that 95% of businesses surveyed, had at least one significant individual who was key to the business. Yet not one of those 95% had any contingency plan in place. This means no insurance and no savings.
Should one of those businesses lose their key man the company could face a huge loss of profit, increased costs such as recruitment fees and training. These will both make business loan replacements more difficult, defaults will cause further charges and a vicious cycle emerges. The survey of those business resulted in 39% of the respondents expecting their business to fold within 18 months of the death or critical illness of their key person.
When you realize this it's no longer surprising that companies such as Amazon and Oracle have spent over 1 million dollars, roughly £634,925 on safeguarding their companies keyman.
For smaller businesses the amount doesn't need to be even nearly this high. A price for a key man insurance plan, to protect for profits of £250K can start at £10.23 per month. This is based on a 20 year term for a 30 year old non-smoker in good heath. Individual costs will obviously vary, but it makes you wonder when the price is so low, why so many businesses don't take the necessary precautions. To find out more and to compare a range of top UK insurers visit: key man insurance [2].