It's pretty common to find situations where the death of a family mogul in a privately-held corporation creates havoc amongst the company, instability for other investors as well as uncertainty in the disposition of the estate. But what about this effect on a publicly-held company? In standard corporate America, intricately-crafted succession plans help guard against the loss of a key figure possibly resulting in loss of significant financial resources. It takes a very rare case, and rare individual, to bring this business-as-normal scenario into potential question. But it can happen, through what I've before called the Steve Jobs effect: when an individual is so completely tied into the success of a corporation or brand that their personal agency - not the legacy of their work - is what stands foremost in customers' and investors' minds, that the potential for such a ripple effect through the public holding is a possibility. The question is, can the individual's estate planing affect that course of events?
Now we come to find the example I've picked - Steve Jobs - is actually a counter-example. This is not for lack of the effect being real - it's because Mr. Jobs got solid estate planning advice (No, he was not my client, but I would have advised in like manner). As reported in the Chronicle yesterday and Forbes earlier this month, his irrevocable trusts secured nearly $3 billion in otherwise potentially-taxable assets for his family. The details of this trust relationship are private to the family, and therefore in a public company become opaque to shareholders.
So how did Apple fare upon learning of his death? There was a significant drop, but at 5% it was only a temporary blip, due to equally impeccable transition planning on the part of Jobs. Certainly, questions about succession at Apple are alive and well, but the bottom line is strong and anyone can see that the ship will continue on course for at least the while.
But in other situations a "Jobs effect" could be more significant. The heretical question might arise, where the potential that a mogul's passing could seriously endanger a company's value: could the benefit of direct, open transfer of company assets to clearly involved successors - as opposed to cloaked in a trust arrangement - provide transparency and security enough to offset the tax hits that would follow? The answer would clearly depend on the individuals, and would probably be an extraordinary case, but it's interesting to ponder nonetheless.
BB
