The Difference Makers: Key Person(s) Value

In small businesses, it is common to apply what is called a "key person" discount to appraised value, reflecting the reality that the loss of that one person can create a significant change in its fortunes. While that practice is not explicitly followed when valuing bigger businesses, and especially publicly traded ones, the OpenAi fiasco (where the board fired Sam Altman, the face of the company, and then found itself fired a week later) and the long standing question of how much Elon Musk adds to (or detracts from) Tesla's value indicates it is important even at larger entities. In this session, I look at the variety of people who can be key to an organization's value (from founder/CEOs to celebrity spokesperson), before creating value and pricing frameworks for valuing/pricing their presence. I also look at how businesses can manage key person risk, why it can vary across businesses and implications for employee compensation. Slides: https://pages.stern.nyu.edu/~adamodar/pdfiles/blog/KeyPerson.pdf Blog Post: https://aswathdamodaran.blogspot.com/2023/12/the-difference-makers-key-persons.html Learn more about your ad choices. Visit megaphone.fm/adchoices