Apple faces credibility crisis over Jobs' health
Apple may have wanted to protect Steve Jobs' privacy with the way it chose to address his health. But the end result is a credibility problem that will not go away easily.
After initially reassuring the public that Jobs' health issues were real, but not all that serious, Apple's statement Wednesday that his problems had grown "more complex" outraged many investors and corporate governance experts. Jobs will remain Apple's CEO, but he is turning the responsibility for day-to-day operations over to COO Tim Cook until the end of June to focus on his recovery.
Now that Jobs' health issues seem far more serious than Apple initially indicated on January 5, investors are not satisfied with the cryptic "more complex" explanation provided by Apple, and are publicly wondering if the company has been deceiving them all along.
Questions about Steve Jobs' health intensified following his appearance at Apple's Worldwide Developers Conference in June. He appeared to have lost a significant amount of weight.
(Credit: James Martin/CNET News.com)"The most indispensable chief executive in the United States, beloved by customers and investors for his magnificent turnaround of the company he founded -- and for the amazing gadgets his company produces -- can no longer be trusted on the subject of whether he is healthy enough to continue running the company," wrote Joe Nocera, columnist for The New York Times and one of the few people in the financial media who has spoken directly with Jobs concerning his health.
The main question? After months of insisting that Jobs' health was a private matter, why did Apple release two vaguely worded statements within days of each other, one saying he was fine, and the other saying he was going to have to take some time off?
Apple's responsibility to disclose the true state of its CEO's health has been discussed numerous times in the past several years. While there are no strict guidelines regarding disclosures as they relate to executive health, any health issue that affects a CEO's ability to run the company can be considered "material," and therefore needs to be disclosed to the board of directors and the public.
There are many potential scenarios for how this saga came to pass. It's quite possible that the true source of Jobs' pronounced weight loss was uncovered in the days between its first disclosure on January 5 and Wednesday's announcement. Anyone who has dealt with serious health issues knows that initial test results aren't always accurate, and that doctors can disagree on diagnoses.
But it seems more likely that Apple has had to beg Jobs to be more forthright about his health, and Jobs, a famously hard-headed man, resisted. CNBC reported Wednesday that two prominent tech industry executives considered close friends of Jobs believed him to be very ill and in "serious denial" regarding his health and its effect on his ability to run Apple.
When Jobs was first diagnosed with a rare form of pancreatic cancer in October 2003, he kept the diagnosis secret for nine months while pursuing alternative medical treatments that troubled some of his confidants, according to a March 2008 Fortune story. That strategy ended once his tumor began to grow, and Apple announced that he had undergone successful surgery to remove the tumor after the operation.
In the years that followed, Apple occasionally had to deal with rumors regarding Jobs' health, but nothing like what followed his appearance at Apple's Worldwide Developers Conference in June--he appeared to have lost a significant amount of weight. At that time, Apple insisted Jobs' health was a private matter.
It might have taken the intervention of Apple COO Tim Cook to force Steve Jobs to talk about his health, and the issue will not go away for Cook as he runs Apple during Jobs' medical leave.
(Credit: Apple)When Apple announced that Jobs would be skipping Macworld, it stuck with that communications strategy, deflecting all questions about his health even though the decision appeared to happen very quickly and took IDG completely by surprise.
A few weeks later, a Gizmodo report that his health was "declining rapidly" finally appeared to spur Apple into commenting directly on Jobs' health just before Macworld started. But the information they released on January 5 does not square with the information released Wednesday, and regardless of the company's intent, that is troubling to outsiders.
Jobs is widely believed to personally approve every piece of official communication that emerges from Apple. It seems clear that he detested having to make the initial statement, writing "so now I've said more than I wanted to say, and all that I am going to say, about this."
But as much as Jobs may have liked that to be the case, it was never going to be so. That's because once Apple opened the door to the idea that Jobs' health was public information, there was no going back. And if it wasn't completely forthright about the state of Jobs' health on January 5, it has also opened the door to legal action.
Did Jobs deceive Apple and shareholders regarding his health? No one has uncovered hard evidence that he did. But it sure looks bad, and securities lawyers are sure to exploit the situation given the drop in Apple's stock in after-hours trading Wednesday and a further drop Thursday.
Apple is a notoriously secretive company. That strategy has allowed better than perhaps any company in America, but it could have backfired in a big way Wednesday. So how can Apple respond?
Lay bare the succession plan, said Patrick McGurn, special counsel at RiskMetrics Group's ISS Governance Services. Tim Cook will run Apple while Jobs is recuperating, but the board of directors needs to reassure investors that it has a long-term plan for providing Apple with leadership, whether that's Cook or anyone else on the management team.
"That's where the uncertainty is. No one can predict the health issues, (but investors are) looking for some level of assurance that the board does have a plan in place" for a post-Steve Jobs Apple, McGurn said.
Apple has hinted at such a plan in the past, but hints won't cut it anymore. And that's going to be a very difficult thing for a company raised in a culture of secrecy to do, especially while Jobs is still its CEO.
Tom Krazit writes about the ever-expanding world of Internet search, including Google, Yahoo, online advertising, and portals, as well as the evolution of mobile computing. He has written about traditional PC companies, chip manufacturers, and mobile computers, spending the last three years covering Apple. E-mail Tom. 
The only thing that won't go away easily is the seemingly endless, unquestionably mindless, perpetuation of the questioning one man's personal health issues.
Unfortunately for you 'journalistas', in this country, as a man is innocent until proven guilty, so, too, are his public issuances veritas until they be verified otherwise.
Give it a break already!
Stay turned.
Waiting for the snide comment from perennial hater of all things Apple, AppleSuxLeo.....
Having said that, based on the haphazard progression of events, I'd say that Jobs was just dealing with a personally difficult situation, perhaps himself in a bit of denial, and that Apple itself got caught without all the right info. I don't see this as being nefarious - and certainly nothing compared to the willful looting of America going on over in many other public companies over the last few years.
How would you, as the car buyer, feel about that company's honesty? Would you trust them enough to put money into that company?
That's the situation they face now.
Investors bought Apple stock, not the actual end products. The analogy stands.
Current financials are good. The investors are worried that the absence or even death of Jobs would have a long term negative financial impact on the company. Being concerned about the health of a company 4, 8, and 16 quarters down the road is just responsible long term investing.
The obligation is to report information that affects results. Like if you know a drug trial went bad. Stock prices can be influenced by many factors. If a CEO has an affair or is going to get a divorce the company does not have an obligation to report that, it has no bearing on the results of the company. Jobs may influence products, hard to say his leave will affect the bottom line any time soon. And even if it did, it has apparently been disclosed is a timely fashion.
The only way a law was broken is if insiders in the company had more information than those outside and they used that information to sell stock at a time when they had non-public information. I suspect that Apple executives have been careful about that aspect.
Investors who like the leadership of Steve Jobs exclusively now have notice that he will not be available for the next 6 months. It appears that when conditions changed shareholders were made aware of it. I can't see how one would reasonably expect more than that.
I really don't see a scandal. It may feel like a credibility gap to some. What it should be is concern, not for the price of an equity, but of the life of a person who over the years we have all grown to know and appreciate. None of us can deny the extent he has contributed to our lives, all the more reason to hope first and foremost for his recovery and grant him the respect we'd want for someone in our family.
...yet there's nothing in your statement about the health of any member thereof. As long as Apple itself continues to grow and remain profitable, there's no cause to panic (unless you're an idiot day trader who freaks and tweaks at the slightest news about anything. Seriously - traders should be required to hold on to purchased stocks for at least 30 days - it would damned sure force a bit of retrospect).
Okay, let me restate what I've already said. Many investor believe that Steve Jobs is a *crucial* component of Apple and that the growth and position of the company is attributable, in large part, to Job's leadership and vision. They are worried that, over the long term, Apple will not be the consumer powerhouse that is now without Job's leading the company. This may or may not be true but investors believe it to be the case - probably because everyone has been saying just that for several years now. As such, investors who are looking at the long term are worried about Job's health.
All the best to Steve, I hope that he recovers his health.
Do we know that? Apple probably had a plan in place six years ago if not before. It is a corporation not a sole proprietorship. How about Al Gore, he is on Apple's Board and is a visionary in his own right; That sound you heard was millions of neocon heads asploding (kind of like blipverts on Max Headroom). Besides we need someone like Al to be a raison d'étre for Apple blog trolls.
If you and I were in business together, and the moment I joined up with your company I quadrupled your profits, and then I became sick, and your question to me was, "Can you tell me if you have terminal cancer? Because I really need to know if next year I will still be making as much money...", I pray to God that someone comes and beats the **** out of you for being such a weasel.
Steve Jobs, please get well, and ignore all of this ignorant 'journalism'.
Seriously man... this kind of navel-gazing (albeit at someone else's navel) is approaching the point where the onus of credibility isn't really on Apple anymore, yanno?
/P
"...once Apple opened the door to the idea that Jobs' health was public information, there was no going back."
Whether or not you like the fact that the press is hounding Jobs about his health, whether you agree or disagree that Jobs' health is a public matter, whether you're a fanboy or a hater, Apple has put themselves in legal jeopardy by opening the door. Drop your passions at the doorstep and consider:
Had Apple steadfastly refused to discuss his health leaving unaddressed rumors to negatively affect Apple's stock, Apple may still have been sued by aggressive shareholders' rights attorneys, but they probably would not win because there's little precedent to support a company's duty to disclose health information of this kind.
If, on the other hand, Apple had been forthcoming all along and disclosed all Jobs' health details as they unfolded, they could also get sued for scaring the stock price down, but again, that would be a hard legal battle to win because full disclosure is rarely frowned upon.
The problem here is simple: once a company takes action to dispell or confirm a rumor about an important issue to the company, they have a *created* a duty to continue the flow of information about that issue. Apple can't say "Jobs is fine" to stop the bleeding (especially if it's not true), then go silent, then contradict themselves. They would have been much better off taking either extreme -- now they're going to get sued for sure and possibly lose. A shareholder attorney may not even have to prove that Apple lied about Jobs' health early this month, they may only have to point out how Apple's inconsistent communications about the subject made the problem worse.
Run silent or choose full disclosure -- anything in the middle is a bad strategy.
-Mister Winky
it's a slippery slope to some extent. There're reasons to stay OR go down it, and if Apple's original intent was to stay silent, then once they 'gave in,' "there was no going back."
You can't take a step down it and expect to come back, which seems what Apple attempted to do.
Personally I could care less what Apple disclosed about Jobs' health, because I honestly don't believe that a permanent leave would affect ITS health. As an investor I'd obviously be cautious and aware, but it shouldn't be something to panic about.
Oh, and don't forget lots of question marks in the heading and the body of the story.
- by FireFox_User January 15, 2009 6:33 PM PST
- Oh no... here come all Apple Fan-boys...
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