Apple CEO Steve Jobs’s decision to take a medical leave of absence and the ensuing stock-market tremors sparked debate over the balance between Jobs’s right to privacy and the needs of investors to evaluate his company.
Writing in The Atlantic online, General Electric's former counsel, Ben Heineman, led the charge by arguing that Jobs is legally required to disclose the nature of his illness.
“The right to privacy of a CEO about medical conditions should be outweighed by the need for disclosure under certain conditions,” he wrote. Heineman went on to urge the Securities and Exchange Commission to establish stricter rules for disclosing illnesses to investors.
The SEC declined to comment on whether it is considering such a move, but analysts say any new regulation would be complicated.
Although the commission requires relatively immediate disclosure in some circumstances--including the retirement, resignation, or termination of top company officials--Jobs’s situation doesn’t fall neatly into any category.
Under SEC regulations, a company must reveal when a principal financial officer temporarily turns his or her duties over to another person. In the extreme event that a CEO dies, the rules do not require a company to report the death.
A company may voluntarily report a top official's health problem if it affects operations in a “material” way.
If federal regulators were to consider stricter health rules, they would likely need to determine what affects a stockholder’s investment in a material way, said Brian Breheny, a former SEC official and current partner at Skadden, Arps, Slate, Meagher & Flom.
“For those at the SEC, the question would become, ‘What is the trigger?’ ” he told National Journal. “Regulators would have to decide where the line is and when something becomes material.”
Jobs may be considered personally critical to Apple’s success, but the same can’t be said for CEOs of every company, and government rules would need to apply the same criteria across the board, Breheny said.
Harvard Business School professor Bill George said that although Jobs is an “irreplaceable icon” who has greater-than-average sway over his company’s future, no new government regulations are needed.
“I don’t know what more information they could disclose,” he said, noting that in Jobs's case, the full extent of the illness may not yet be known. “As opposed to past cases, Apple has been as forthright as they should be.”
Continued updates on the CEO's condition would be in order, George said, but only if they reduce uncertainty.
As to Jobs’s future with Apple, “As long as he is breathing, he will be on top of it,” George said. “We shouldn’t underestimate what that company can do.”