Investors are asking – and regulators may well be examining closely – why the serious health condition of America's (arguably) most iconic chief executive was kept secret. Shareholders have the right to know things that materially affect the value of a company. Doesn't a life-threatening disease count?
Or is there such a thing as too much transparency? A related question: Does it matter that Mr. Jobs is not merely the leader of a corporate team but embodies a company in ways that few other CEOs do?
Criticism on the rise
There's little guidance from federal regulators on the subject, so the legal, medical, and ethical debates can continue unabated. So far, Jobs's critics have been far more vocal than his supporters.
Even legendary investor Warren Buffett has weighed in, saying Jobs should have divulged his condition. “Whether he is facing serious surgery or not is a material fact,” he told CNBC Wednesday. Material facts, according to federal rules, must be disclosed to shareholders.
A CEO's rights?
But wait! Doesn't everyone, even a CEO, have some right to privacy about their medical situation? And it's not as if Jobs or Apple kept it all secret. On Jan. 5, after lots of speculation about his dramatic weight loss, he released a statement saying his doctors believed he had "a hormone imbalance" and that he was following a "relatively simple and straightforward" treatment for a "nutritional problem."
On Jan. 14, he followed up with an e-mail to Apple employees (which Apple made public) saying he had learned in the past week that the health issues were "more complex than I originally thought" and that he was taking a medical leave of absence until the end of June, remaining as CEO but leaving Apple's chief operation officer in charge of day to day operations.
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.... 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.
The issue died down as the Jobs-less Apple performed well during its Macworld conference and the launch of its new smartphone this month.
Then on Saturday, the Wall Street Journal reported that Jobs had had a liver transplant in April. When reporters began questioning why Jobs had been able to get a transplant so quickly, given that people wait for months or years, his doctor released a statement (.pdf) Tuesday that said Jobs received the donor organ so quickly because he was "the sickest patient on the waiting list" of his blood type.
But if Jobs's diagnosis was so severe, shouldn't Apple have told shareholders? Would Apple without Jobs be as valuable?
The situation is so unusual that the Securities and Exchange Commission has little guidance to offer. The most relevant language comes in its 8-K form (.pdf), which requires companies under Item 5.02 to disclose when "the registrant’s principal executive officer, president, principal financial officer, principal accounting officer, principal operating officer, or any person performing similar functions, or any named executive officer, retires, resigns or is terminated from that position."
The same section requires public disclosure "If the registrant appoints a new principal executive officer, president, principal financial officer, principal accounting officer, principal operating officer, or person performing similar functions."
Jobs disclosed his leave of absence but said he remained CEO. Was he well enough to continue in that role? Did Apple have succession plans? These and other questions will continue to swirl for some time.
How dangerous was it?
It's not clear how life-threatening the condition was believed to be. The doctor's wording seemed to suggest that Jobs was not the highest priority "acute" patient, expected to live less than a week without a transplant. On the other hand, it had to be serious enough on the medical scoring system to allow Jobs to jump ahead in line (as many others in serious condition do).
The scoring system rates patients from 6 to 40, with anything above 15 considered "at considerable risk of dying in the short term without a transplant," according to a statement released Wednesday by the United Network for Organ Sharing (UNOS), which operates America's organ-transplant network under federal contract.
Half of those rated between 19 and 24 get a liver transplant within about 15 weeks of being listed. That time frame would fit Jobs's situation if indeed he was listed by UNOS in January and had the operation, as the Wall Street Journal reported, in April. Half of the people rated 25 or over get a transplant within 20 days, UNOS says.
After Jobs originally announced his leave of absence in January, the SEC reportedly was reviewing the company's disclosures. On Wednesday, an SEC spokesman declined to comment on what actions, if any, the commission was taking.
Pressure on Apple may come from other avenues, too. Shareholders could mount a lawsuit in state courts, where there could be legal precedent for a claim.
But with Jobs recovering and soon back to work, presumably, would a suit be in shareholders' best interest? Or is that taking transparency too far?
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