January 20, 2023
Fortune recently published an article where Fred Foulkes, Professor of Management and Organizations, discusses the challenges faced by firms when it comes to key-person risk.
An Iceland-based shareholder has proposed that Tesla’s board create and maintain a key-person risk report for CEO Elon Musk ahead of Tesla’s annual meeting in May. It has been said that key-person risk comes in three flavors – one executive is too talented for the job, one person has too much power, or some companies are so complex that only one mind can handle them. Companies of all sizes should protect themselves against key-person risk, but midsize firms may have the most difficulty dealing with it, according to Paroon Chadha, CEO and cofounder of OnBoard. According to him, large companies are typically aware of this hazard and prioritize succession planning. Professor Foulkes says most companies protect a top executive’s energy more than Tesla. One example he recalls is when a CEO’s son sought to become chairman of the company. Only after the CEO agreed not to spend much time at the startup did the board agree to it.
“At least in my experience on boards,” Foulkes deadpans, “you want your CEO to be full-time at the company.”