If the CEO is sick, do the shareholders have a right to know?
That's the question raised, but not exactly answered, by a Fortune profile of Apple CEO Steve Jobs released Tuesday, the day of Apple's annual shareholder meeting. The story reveals that after learning he had a rare form of pancreatic cancer in October 2003, Jobs kept his diagnosis secret for nine months--outside a small group of confidantes--while he attempted to seek alternative methods of treatment for a tumor.
Fortune says Jobs and Apple's inner circle debated whether they had to reveal news of his diagnosis to shareholders, but decided they were not obligated to do so after consulting with outside lawyers. Jobs eventually decided to undergo surgery to remove the tumor, and Apple released an e-mail from Jobs to employees announcing he had received treatment the next day, August 1, 2004.
Did Jobs and Apple mislead shareholders by failing to disclose his diagnosis for so long? There's no hard-and-fast rule for this situation--some companies decide to disclose an executive's illness as soon as they learn of it; others decide to wait so long as the executive remains in day-to-day control of the company. Still, two corporate governance experts interviewed for the article say Apple should have disclosed Jobs was about to undergo surgery: "How would the shareholders have felt if they said he died on the operating table?" wondered Ralph Whitworth, a former director of Waste Management who was chairman of the board when its CEO was diagnosed with a brain tumor.
Waste Management issued a statement just before John Drury was to undergo surgery on his brain, which is what Whitworth feels Apple should have done with Jobs. But Drury had a seizure three weeks before he had surgery, as Fortune reported in 1999; should Waste Management have disclosed anything at that point?
This is an extremely difficult situation to second-guess. If doctors are optimistic about the patient's prognosis, and the executive remains outwardly healthy and alert, does anyone need to know? Obviously, nobody wants to see a repeat of Woodrow Wilson's second term, when the president's extremely poor condition following a stroke was kept a secret from the public, and even his own cabinet officials.
But that's not what we're talking about here. No one disputes that Jobs was totally in control of Apple up to the day he received surgery. No one has suggested that his ability to lead the company was affected by his decision to seek alternative treatment methods for his cancer, which he shelved in favor of surgery after discovering the tumor had grown, according to Fortune.
CEOs--even ones as public as Jobs--have a right to keep their health a private matter so long as they aren't hurting their company. That's what a board of directors is for, to decide at what point a CEO's effectiveness has diminished for whatever reason. Clearly, Apple and Jobs didn't encounter problems then--and have done pretty well since--so does it really matter when he learned of his illness?
I do think, however, that Apple's obsession with secrecy will come back to haunt it at some point. Some analysts estimate that Jobs is worth as much as $16 billion in market capitalization to Apple, and if he suffers some sort of relapse, the company's stock will definitely suffer. Speculation has circled about Jobs' health since 2004, and Apple has to be very careful how it will handle the issue in the future.