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Feb 2, 2017

Note: This is part one of two parts. Today’s article focuses on corporate readiness for a sudden loss of key leaders. Tomorrow’s article discusses how HR should respond to an on the job death.

Human resource professionals have a complicated job: payroll, discipline, morale, harassment, terminations, etc. An HR professional who doesn’t stay proactive on these issues could expose their company to liability. But no one seems to talk about a massive issue that any company could face at any time – what should HR do when an employee dies? Or better yet, what can HR do in advance to minimize the impact of a key employee suddenly passing away?

We know it’s not a fun topic. But we’re lawyers; we deal with death sometimes. And we’ve seen these nightmares play out. Think of it like this – if one or both of your parents died when you were a young child, your life would be negatively impacted for a long time. The same goes for a company. The death of anyone, especially a key managerial employee, can devastate an organization for a long time, maybe even destroy it.

In 1993, a high-profile employee death announcement made waves in the media. CEO Rich Snyder and his right-hand man Phillip West of California-based fast food chain In-N-Out were killed when their small plane crashed. According to a Los Angeles Times article, the two executives had broken a long-standing rule that they never fly together. Fortunately, In-N-Out managed to survive and it has thrived in the years since, but the relatively small, family-owned business could have been destroyed.

Another harrowing example of this is Cantor Fitzgerald. The firm lost 650 employees on 9/11 – two-thirds of the company. A documentary was made about the aftermath. We highly recommend it.

This is a two-part series. This article discusses the scenario where a managerial employee dies outside of work. In the next article, which will post tomorrow, we’ll discuss when someone dies while on the job. So here we go, folks. It’s time to put on our worst-case-scenario hats and think proactively.

Your plan’s first steps

First, consider taking out life insurance on all high-ranking managerial employees. Would you like a good example? Carrie Fisher just died while in the middle of filming a Star Wars trilogy worth billions of dollars. Fisher died on December 27, 2016 after suffering a heart attack on a plane as it prepared to land in Los Angeles. That’s a huge problem for Lucasfilm, which is owned by the  Disney company. But, in late December, the Insurance Insider reported that Disney owned an insurance policy on all the major actors in the movie, and stood to recover $50 million from Lloyd’s of London as a result of Ms. Fisher’s unfortunate death.

According to the report, Disney had taken out what is known as “contract protection cover” on Fisher who had signed on to reprise her role as Princess Leia in three new Star Wars films. The policy was designed to pay out in the event Fisher was unable to fulfill her contractual obligation – and offset any losses from being forced to make a movie without an essential person. While $50 million is probably overkill for 99% of companies, it would be wise to at least speak with a financial planner about what it would cost. Life insurance is generally very affordable.

Where is your critical information?

Second, develop a game-plan for the loss of the major players at your organization. What would happen if your company suddenly lost its CFO or chief technology officer? Who is next in command if the CEO has a sudden heart attack? Is there a succession plan in place? Without one, will there be a power vacuum and internal strife? Do you have all the server passwords?

In the event of a CFO’s death where is all the financial information? Tax information? What about banking information? Would payroll be disrupted?

Most important of all, do you have the contact information for your employees’ families? If you needed to call the CFO’s husband right now, would you be able too?

Start planning with a list

You need to think about all the core functions of the company, make a list, and identify any informational bottlenecks (where only one key person has access and control of the critical information). Then you can begin to develop a plan. A simple list of all the essential information, and where it is located could save your company millions of dollars. Here is a basic list to get you started:

  • Employee emergency & family contact information
  • All critical passwords (banking, servers, computers, hosting, email)
  • Tax information
  • Financial information
  • Loan information
  • Banking information
  • Shareholder & board of directors contact information
  • Key contracts and insurance policies
  • All critical vendor contact information (accountants, lawyers, insurance brokers, bookkeepers, web developers).

The list could be longer, but every organization’s list will be different. I suggest spending a few hours preparing this list so that you can begin to discuss how to prepare your company if the worst should happen.

Employee emotional wellbeing

Organizations are made up of people and people have emotions. When someone dies, people re-evaluate who they are and where they are going. It is not uncommon that when a larger-than-life person passes away, everyone within their circle of influence is devastated.

OK, let’s say the worst has happened, and the owner or the CEO or CFO or other top executive has suddenly passed away. Now what? Aside from dealing with the pragmatic ramifications we discussed above, what about your company morale? What does this do to the workforce?

In 2012, Robert Deprez, a business consultant with experience as a CEO and CFO wrote about the effects that a high-ranking employee death can have on company morale. He notes that such an event creates an uncertain future as well as a loss of focus.

“Simply put,” Deprez writes, “When the heart is heavy, the head does not function.” Deprez also notes, “Even those who were not particularly close to the CEO may relive the pain experienced from past deaths of loved ones and bring these emotions to the surface.”

We know it’s cliché to talk about Steve Jobs, but his death had a substantial impact on people inside and outside of Apple. This Forbes article said that people were psychologically connected to Jobs, even if they had never met him, and many were devastated when he died. If such a death occurred at your business, particularly a smaller business, grief counseling may be a very wise option to offer employees. Not only because it would help them individually, but the company’s bottom line may benefit if its workforce is grieving in a healthy way, rather than turning to substances, seclusion, or burying themselves into work.


While the sudden loss of several employees is a nightmare no one wants to imagine, even the loss of one or two high -evel employees can have wide ranging consequences for a company and the people who work for it. So, it’s time you had a discussion about this topic with higher management to prepare your organization.

In the second part which will be online tomorrow, we’ll take a closer look at the very scary scenario when an employee dies on the job. We’ll dive deeper into the responsibilities companies have to employees and their families.