Given the recent news about a certain celebrity and their domestic violence issues, we think it is time we address the ramifications of such actions. Yes, celebrities and high profile individuals mostly shy away from the “role model” title, but they cannot escape it. Indeed, to whom much is given, much is required. Unfortunately, the financial repercussions are damaging to the celebrity and their entourage.
Direct costs associated with a PR blunder are usually related to the celebrity’s earnings. NFL player Michael Vick had to forego the last few years of a 7-year contract worth over $100 million, and was asked to repay a $20 million sign-in bonus. New York Giants Plaxico Buress suffered similar sanctions on a $25 million 4-year contract. Lost endorsements, appearance fees and future revenue add to the tally. Besides the obvious direct costs associated with a major PR blunder (loss of endorsement, firing from the team, cancellation of shows, etc.) there are hidden indirect costs that can be even more damaging.
Typically, in such cases, the publicity machine goes into over-drive and such work does not come cheap. If there are legal implications, the hourly bill is usually stiff as well. With top lawyers commanding hourly rates in the hundreds of dollars, the legal bill can be in the high six or even seven figures. A little know fact is that even existing loans can be called, as was the case with Michael Vick when two banks asked for immediate repayment in full of two loans. The loans (totaling $1.1 million and $2.2 million respectively) were called due to “an adverse change in his employment which could affect the borrower's ability to repay the note." Such costs have a trickle-down effect affecting others such as a mother whose mortgage was covered, the friends that were employed by the celebrity or even the ex-wife due to the inability to keep up with child support payments.
When it comes to African Americans, celebrities are usually the first ones in their families to come into such wealth. There is no readily available hand-book telling them how to handle it and showing them the cost of their bad choices. In addition to Tax and Estate planning, Investments, Insurance and Retirement, it is time to add one more category to the typical financial planning spectrum: Moral Capital preservation. It affect a person’s current and future earnings, as well as their freedom in some cases. Our brothers and sisters disregard this component of their wealth, but we can only try to help with this blog.
Direct costs associated with a PR blunder are usually related to the celebrity’s earnings. NFL player Michael Vick had to forego the last few years of a 7-year contract worth over $100 million, and was asked to repay a $20 million sign-in bonus. New York Giants Plaxico Buress suffered similar sanctions on a $25 million 4-year contract. Lost endorsements, appearance fees and future revenue add to the tally. Besides the obvious direct costs associated with a major PR blunder (loss of endorsement, firing from the team, cancellation of shows, etc.) there are hidden indirect costs that can be even more damaging.
Typically, in such cases, the publicity machine goes into over-drive and such work does not come cheap. If there are legal implications, the hourly bill is usually stiff as well. With top lawyers commanding hourly rates in the hundreds of dollars, the legal bill can be in the high six or even seven figures. A little know fact is that even existing loans can be called, as was the case with Michael Vick when two banks asked for immediate repayment in full of two loans. The loans (totaling $1.1 million and $2.2 million respectively) were called due to “an adverse change in his employment which could affect the borrower's ability to repay the note." Such costs have a trickle-down effect affecting others such as a mother whose mortgage was covered, the friends that were employed by the celebrity or even the ex-wife due to the inability to keep up with child support payments.
When it comes to African Americans, celebrities are usually the first ones in their families to come into such wealth. There is no readily available hand-book telling them how to handle it and showing them the cost of their bad choices. In addition to Tax and Estate planning, Investments, Insurance and Retirement, it is time to add one more category to the typical financial planning spectrum: Moral Capital preservation. It affect a person’s current and future earnings, as well as their freedom in some cases. Our brothers and sisters disregard this component of their wealth, but we can only try to help with this blog.
