There are plenty of rewards that come with being the CEO of a public company, but the job comes with myriad burdens as well. Endless time demands. Responsibility for thousands of jobs. Intense pressure to perform. And now, we may have to add another downside to the list: forfeited medical privacy.
Fiat Chrysler offers the latest evidence of this phenomenon. The automaker’s recent response to the deteriorating condition of its dynamic CEO Sergio Marchionne reflects a move toward openness among public companies in discussing the health of their leaders. While Fiat Chrysler did not dive into great detail about the complications from surgery that led to Marchionne’s death last month, it did release a public statement days earlier informing shareholders that “unexpected complications” from surgery had “worsened considerably,” and that he would not be able to return to work.
In years past, issuers have been more circumspect about the failing health of their key executives. Viacom and CBS Corp., for instance, stayed mum on the condition of Sumner Redstone until he gave up his executive chairmanship of both companies following a court-ordered psychiatric exam. In the most notorious example of medical information being withheld, Apple remained adamantly tight-lipped about Steve Jobs’ pancreatic cancer in the years preceding his death.
The inconsistent approaches can be blamed, in part, on the fact that there are no specific rules to guide public companies deciding what to reveal about a CEO’s health condition. Of course, all issuers are subject to the general requirement that they disclose risks that could have a material impact on their future results. As former SEC commissioner Harvey Pitt noted, any condition that would keep a CEO from meeting his or her responsibilities for a significant period of time would meet that standard, as would the CEO’s actual removal. (Fiat Chrysler, then, had little choice but to disclose that Marchionne had been replaced.)
But short of those extremes, it is up to the company to make its own call. Does it disclose anything about a CEO who suffered a mild stroke? A CEO who has entered inpatient treatment for alcoholism? A CEO with severe depression?
In such situations, there are weighty considerations that argue for disclosure beyond the fact that the conditions may qualify as “material.” Many corporations will want to honor their shareholders’ desire for information or their own commitment to transparency. There are reasons of self-interest as well: a corporation may want to avoid the reputational damage or stock volatility that can accompany a secretive approach to their CEO’s health status. (The bottom fell out of Apple’s stock after Jobs took a leave of absence, “making it difficult for investors to consider whether and how his ailments might affect Apple going forward.”)
And indeed, the trend is toward openness. In recent years, Goldman Sachs, JPMorgan Chase, and Berkshire Hathaway have all disclosed cancer diagnoses of superstar CEOs Lloyd Blankfein, Jamie Dimon, and Warren Buffet. Theses CEOs, Buffet in particular, are big personalities inexorably intertwined with the companies they lead, which arguably lowers the bar for the health conditions that qualify as material.
On the other hand, there are powerful reasons to avoid making medical information public until absolutely necessary, beginning with the CEO’s privacy. That’s not just a personal desire; in some situations, it may be a right that the employer is not legally entitled to violate. (Former commissioner Pitt suggests, however, that if the question is ever tested, CEOs may be given the status of “public figures” and afforded narrower medical privacy rights than lower-profile employees.) For other reasons, too, it may be easier not to speak. For one thing, if the CEO’s condition remains a secret to all, there can be no worry about insider trading or selective disclosure. As Blankfein has been quoted as saying: “The peculiarity of my being a CEO of a public company was, you really can’t tell anybody until you tell everybody.”
Experience tells us, however, that companies and CEOs alike are moving toward ever-greater disclosure about their medical conditions. It shouldn’t be minimized, but perhaps it will soon be considered part of the price one pays for success in business.