Are a CEO’s health problems a private matter?
Are a CEO’s health problems a private matter? Or does he or she have an obligation to disclose them to investors and other stakeholders?
These are questions Apple and its iconic co-founder and chief executive Steve Jobs have had to face ever since he was diagnosed with a rare form of pancreatic cancer in 2003. Happily, the disease proved to be treatable with surgery, which Jobs underwent in 2004. But shareholders didn’t learn that Apple’s chief had been ill until he sent out an email to employees, announcing that he had had cancer but was now “cured.”
The issue of what, if anything, the company should disclose about its CEO’s health concerns resurfaced last summer, when Jobs spoke at Apple’s annual developers conference. There he appeared, as the New York Times put it, “unusually thin and haggard.” Reacting to the inevitable rumors that Jobs was ill again, the firm’s public relations department reported that he was suffering from “a common bug.”
A PRIVATE MATTER
However, according to the Times’ John Markoff, Jobs told some associates that he was experiencing “nutritional problems.” Moreover, people close to Jobs told Markoff that in early 2008 he had a surgical procedure to treat a problem related to his weight loss. Yet, in July, in a conference call after the release of Apple’s quarterly earnings statement, a senior officer deflected an analyst’s question about Jobs’s health, calling it “a private matter.”
Not surprisingly, investor uncertainty about whether Jobs would be able to continue as CEO was reflected in sharp fluctuations in the price of Apple’s stock. In December, the worries intensified when the company said that Jobs would not give his much-anticipated annual keynote address at Apple’s Macworld conference. At first, the reason offered by a spokesman was that the firm would not take part in the event after 2009. That “explanation” only fueled the rumors.
So, last week, Jobs responded by issuing a statement. About his weight loss, he said doctors had finally determined that it was due to a “hormone imbalance”—a “nutritional problem” whose remedy “is relatively simple and straightforward.” This announcement seemed to calm investors, with Apple’s stock price rising by 4 percent.
Then, this week, Jobs emailed Apple employees that he had just learned that “my health-related issues are more complex than I originally thought.” Consequently, he said, he is taking a six-month medical leave of absence, although he will “remain involved in strategic decisions while I am out.” The news alarmed investors, as shares dropped 7 percent in late trading.
Clearly, Apple and its chief executive have not been diligent in keeping investors, employees, and other stakeholders informed about the state of Jobs’s health. Should they have been?
LEGAL VS ETHICAL POINT OF VIEW
From a legal point of view, the company has a duty to disclose information that is “material”—i.e., facts a reasonable investor would need to know in order to make an informed decision about whether to buy or sell the company’s stock. Materiality can be difficult to establish, and if litigation ensues, lawyers will argue at length over exactly what Apple should have revealed and when.
But, from an ethical point of view, the answer seems less arguable. To be sure, Steve Jobs, like anyone else, has a right to keep details about his health problems private. But an individual’s right to privacy is not absolute. In this case, it has to be balanced against obligations Jobs and his board of directors have to Apple’s stakeholders, especially its shareholders, employees, and customers.
Since Steve Jobs returned to Apple in 1997, its breath-taking success has been due in no small part to his visionary and aggressive leadership. Many investors worry (rightly or wrongly) that Apple would not be as innovative and market-savvy without Jobs’s famously tight control over its direction and operations. Apple well knows all this—indeed, the company has shrewdly leveraged the immense admiration and popularity Jobs enjoys, encouraging the identification of Jobs with the Apple brand. So, by design, investor confidence in Apple has been based to a considerable degree on confidence in Jobs’ leadership.
In general, the company has an ethical obligation to alert investors—and other stakeholders—to serious risks to the company’s health. Because Apple and its CEO have actively encouraged “the Apple community” to associate the company’s success with his leadership, they have an obligation as well to keep stakeholders apprised of serious risks to Jobs’s health.