Steve Jobs' health is not a private matter
Sadly, I must reaffirm my position stated during Apple CEO Steve Jobs' last medical leave, in January 2009: His health situation isn't a private matter, and, frankly, it's even less so now. The seeming suddenness of Jobs' more recent medical leave, which this time is open-ended, raises reasonably disconcerting questions about how long he can continue as chief executive and whether Apple has in place an appropriate succession plan. I didn't expect to return to this topic again, and surely Macheads will beat me aside the head with snide and accusing comments or rebuttal blog posts. So be it.
As leader of a public company, Jobs has no inherent right to privacy where his ability to act as CEO is concerned. Jobs' share in Apple was, last time I checked, well below 5 percent. He isn't principal owner of Apple, tens of thousands of shareholders are. If not Jobs, then at least Apple's board of directors has a responsibility to appraise shareholders about such an iconic CEO's realistic ability to continue in the role. Right now, Jobs has essentially abdicated the responsibility for an undetermined amount of time. In a January 17 letter, Jobs explained that he had "asked [COO] Tim Cook to be responsible for all of Apple's day to day operations." Not some responsibility but all.
The Securities and Exchange Commission doesn't explicitly require disclosure of executives' health-related issues, but it does encourage companies to disclose succession plans. From Stanford School of Business paper "CEO Health Disclosure at Apple: A Public or Private Matter?" published last week: "The SEC has encouraged companies to disclose information on their succession plans so that shareholders can assess whether the company might be 'adversely affected due to vacancy
From that perspective, Jobs' health is not a private matter but one of public company responsibility. On January 17, Jobs didn't give a time period for the medical leave or even assert that he would return to his responsibilities. "I love Apple so much and hope to be back as soon as I can," he wrote. Hope expresses desire to resume duties, not expression of confidence that will be the outcome. By comparison, in Jobs' letter for the last medical leave, he gave a finite period (six months) and referred to Cook taking responsibility "for Apple's day to day operations" without using "all." As later was revealed, Jobs was quite ill during the last medical leave, when he received a liver transplant. Could he be sicker this time -- something that could be insinuated by the seemingly sudden and open-ended medical leave?
Rules of Succession
In a January 18 interview with Bloomberg, Charles Elson, director of the University of Delaware's Center for Corporate Governance, said that Apple hasn't met its responsibility to shareholders: "Much more disclosure is in order. I think the board really should come forward and let--give--investors know more of what they know. Transparency in this situation is really valuable." He added: "The problem is that in this company, investors place a lot of stock in Jobs' presence, and in the past his presence or absence has caused some real gyrations in the stock price." Elson emphasized that when investors bought Apple shares they "expected full and fair disclosure of the company's fortunes. I think this would include something like this" -- the "this" referring to Jobs' medical leave.
In a January 18 post at Seeking Alpha, private investor and writer Ravi Nagarajan took a similar position about Apple's responsibility to disclose but went further -- contending that Apple's board of directors "lost significant credibility due to inadequate disclosure of the succession issue in 2009." I took similar position two years ago, arguing on the now defunct Apple Watch blog that "there are no private matters at public companies" -- that the board failed its responsibility to shareholders.
Nagarajan and I weren't alone taking what some Apple defenders viewed as a hard and insensitive position. In January 2009, Business Insider editor-in-chief Henry Blodget wrote: "At best, Apple's board has failed to be forthright about its chief executive's declining health for at least six months and probably longer. At worst, it has been lying to the market and Apple's customers for the better part of a year." Blodgett is a former Wall Street analyst who learned some hard lessons through experience about the importance of proper disclosure. "Whatever credibility Apple's board had left evaporated" when Jobs announced his medical leave in January 2009. More searing, and setting the title for the post you're reading:
Steve Jobs' health is not a "private matter" -- it's a matter of legitimate and serious concern to everyone who owns or does business with Apple. And these folks deserve to be given enough respect and information that they can make their own decisions about whether Steve really is likely to return in six months -- and, if not, what the company's ongoing management structure will look like.
Right to Know or Right to Privacy?
But Apple defenders argue that Jobs deserves his privacy, particularly because of illness. In a January 21 post at Annenberg School for Communication and Journalism-sponsored Neon Tommy, staff writer Dan Watson writes about Jobs' illness:
During this entire time, he kept control of his company, whether it was away from the offices or physically at work. All the while, he pleaded for privacy. The arguments against granting him that privacy are pathetic. For years, he's stood in front of audiences a shadow of his former physical self: gaunt, frail and malnourished. Still, he spoke with zeal and energy. He's been in love with his work despite the fact it was slowly killing him. What more do you need to know, stockholders?
Shareholders need to know how sick Jobs really is, how likely he is to return and what is Apple's succession plan should he not return. Their investing in Apple and, in 2010, driving up shares to all-time highs and market capitalization over $300 million -- second only to Exxon -- gives them the right to know. And if investors respect or care about Jobs, they should want to know.
It is understandable that Mr. Jobs and his family would like some degree of privacy in the midst of health issues. Most of us would have the same desire to be left alone under similar circumstances. However, as a high profile CEO who is widely considered to be irreplaceable, Mr. Jobs and Apple's board have a duty to shareholders to be more forthcoming regarding succession issues. Giving the board the benefit of the doubt seems like a stretch given the lack of disclosure in 2009.
Other CEOs have chosen transparency. In 2000, Berkshire Hathaway CEO Warren Buffett disclosed his colon surgery. In a June 2009 CNBC interview, after Jobs' liver transplant was revealed and soon before he returned from the last medical leave, Buffett affirmed the importance of full disclosure: "If I have any serious illness or something coming up of an important nature, operation or anything like that, I think the thing to do is to just tell...the Berkshire shareholders about it. I work for them."
That's right, the CEO works for shareholders. Regarding Apple's failure to disclose about just how sick was Jobs, Buffett said: "It's a material fact. Whether he is facing serious surgery or not is a material fact." Berkshire's CEO said that if he was facing surgery "that's important to get out...they're going to find out about it anyway, and so I don't see a big privacy issue or anything of the sort."
Buffett made no small accusation by using the term "material fact," which is covered by SEC Rule 10b-5 regarding the disclosure of information about public companies. The Securities and Exchange Commission did open an investigation into Apple's fiduciary responsibility regarding Jobs' health during the last medical leave, which hasn't led to charges. But in context, Buffett is really making an ethical, rather than legal, distinction -- a public company's fundamental fiduciary responsibilities to its shareholders.
From that perspective, as long as Steve Jobs is chief executive of a public company his health situation is not a private matter. If he wants privacy, then he should return to private life and take the time necessary to recover his health or to spend with his family whatever time is left to him. I wish Jobs a speedy recovery. He's a luminary whose light deserves to shine longer. But illness, even cancer, doesn't absolve him or Apple's board of directors of their responsibility to the company's real owners, its shareholders.