Risk Insider: Nir Kossovsky

Protecting the Enterprise When the CEO Stumbles

By: | February 12, 2018 • 3 min read
Nir Kossovsky is the Chief Executive Officer of Steel City Re. He has been developing solutions for measuring, managing, monetizing, and transferring risks to intangible assets since 1997. He is also a published author, and can be reached at [email protected]

There are a wide variety of factors that lead stakeholders – investors, employees, customers, lenders, suppliers, regulators – to become enamored with a company. While much of it may rely on a cold, hard analysis of the industry, economic trends and financial performance, for some companies, especially small cap, early stage or rapidly growing companies, the CEOs’ personality can become a major factor. Stakeholders believe in the CEOs’ vision, personal charisma, leadership team and the culture they’ve built.

CEOs are also a major source of reputational risk and companies today are quick to jettison leaders for questionable ethical practices even from eponymous firms, or companies where CEOs become an outsized component of corporate reputation — like Uber.

As a result, when we analyze and underwrite reputational risk at companies, we consider a number of CEO-related questions:

  • What do stakeholders expect of the CEO?
  • Are there different expectations among different groups of stakeholders?  For example, a younger customer may give greater weight to social responsibility, while an older investor may give more weight to financial performance over time.
  • What are the consequences if stakeholders are disappointed?
  • What impact is there if CEO behavior is the source of risk?
  • What mechanisms, if any, is the board using to keep the CEO on track with strategy while the board is protecting the assets of the firm?

One of the crucial factors in situations like these is whether stakeholders believe that, ultimately, the company is bigger than the CEO and that its value is not dependent on his or her presence.  This calculation is partly psychological – can they separate the person from the company in their own minds? How much value does that individual add, above that of a replacement CEO?

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Part of the calculation, however, is very tangible. How strong are the company’s underlying assets? How strong is the company’s leadership infrastructure — other C-level executives, division heads and so on — the people who run operations on a day to day basis?

In the case of Steve Wynn, for example, the answer involves both factors.  Yes, the Wynn name brought cache and added value to properties.  And since the company operates in a regulated industry, its licenses and approvals for projects currently underway now hang in the balance.

One of the crucial factors in situations like these is whether stakeholders believe that, ultimately, the company is bigger than the CEO and that its value is not dependent on his or her presence.  This calculation is partly psychological — can they separate the person from the company in their own minds?  How much value does that individual add, above that of a replacement CEO?

But those properties have a certain amount of intrinsic value — even if some organizations cancel conventions or visitors cancel reservations.

Critically important in all this is the board of directors.  Are they equipped to take quick, decisive action?  Will members of the board be viewed as partly culpable for any CEO-related scandal?  Will there be resignations or will the board remain stable and united?

When a crisis hits, does the board have a simple to understand and completely credible story to their stakeholders, validating their good governance practices and attesting to their prudent stewardship of the company? Whatever steps they have taken over the years to manage reputational risk, do they have third party warranties, in the form of insurance policies, that help them communicate that narrative persuasively in the court of public opinion and mitigate the usual post-crisis onslaught of litigators, regulators, and social media trolls?

Obviously, CEO reputation is always crucially important to any company. But when it is a core component of the corporate brand and enterprise value, boards need to consider additional protections against the individual downfalls that so often occur.

More from Risk & Insurance

More from Risk & Insurance

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.

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That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.

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Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]