How healthy is Apple’s disclosure?

Disclosure practices 4 Comments

The contrary surrounding the adequacy of disclosure from Apple Inc, with respect to the health issues surrounding its co-founder, Steve Jobs, has raised interesting issues about the extent to which corporate boards should go in terms of the disclosure with respect to any personal health issues which are experienced by senior executives.

Broadly speaking, I feel that health issues are the private concern of the individual executives concerned and that corporate board should refrain from public discussion of such matters unless such concerns have a direct impact upon the employment of the executive concerned.

The Steve Jobs Drama
The drama surrounding the health of Jobs unfolded as follows:

• In June 2008, Jobs appeared noticeably thinner at a public event. This sparked off public rumors about his health, particularly after he had battled with pancreatic cancer in 2004.

Despite increasing pressure, the board refused to comment on this matter due to privacy concerns.

• On January 05, Jobs made his first public comment on the issue, stating that his doctors believed they had found the cause – a hormone imbalance.

Jobs indicated that the treatment would be simple and straightforward, and that he would remain in his position throughout the recovery process.

• On January 14, Jobs issued further disclosure, indicating that his health issues were more serious than at first thought, and that for this reason, as well as the distraction arising out of public curiosity surrounding his health, he had decided to take a medical leave of absence.

• The company’s disclosure with respect to the above matter is currently the subject of an SEC Enquiry, to determine whether or not investors were provided with misleading information.

(Jobs is extremely well respected, and of course, I, like many others, sincerely hope for the sake of himself and his family that he is able to make a full recovery)

Two criticisms – one potentially valid
Broadly speaking, criticism of the company’s disclosure falls into two broad categories; (a) that the initial disclosure on Jan 05 was misleading; and (b) the general secrecy of the board regarding Jobs’ health overall.

With respect to the first point, investors may well have a valid complaint.

Directors have a responsibility to ensure that all public disclosures are accurate and are not misleading in any way. Accordingly, investors do have a right to ask questions about why the key messages contained in the two disclosures – just nine days apart – were so different.

It will be difficult to make informed comment on this until the completion of the enquiry, and it is genuinely possible that a clearer picture emerged during the time between the two disclosures about the nature of the illness.

Nevertheless, if the initial disclosure on January 05 does prove to be inaccurate, then this will represent a breach of ethical duty from the board with respect to their responsibilities relating to the accuracy of public disclosure.

When private health is private business
However, I cannot agree with broader criticisms about general non-disclosure with regards to Mr. Jobs’ health.

Apple is under fire for its continued refusal to reveal anything about his health during the months from the time when he began to noticeably appear thinner and the time of the first disclosure on January 05.

But there were two good reasons for the company’s silence with respect to this matter during that time:

• There was nothing definitive to report.

Based on Jobs’ statements, it appears to be clear that neither he, nor his doctors understood the cause behind the loss of weight. Until such time as this was properly determined, neither Jobs nor the board would have had any idea what impact, if any, his health issues would have upon his work in the long term.

• It was his private business.

The only time companies should make any form of public disclosure about the health issues of senior executives is when it becomes clear that the issue concerned has an impact upon the ability of the executive concerned to perform his or her duties going forward.

Beyond that, such issues are a private matter for the individual concerned, and any public disclosure or discussion on such matters from the company would represent an invasion of privacy and would be completely inappropriate.

In the case of Jobs, the company was correct in its refusal to discuss his health until it became clear that it would have an impact upon his position at the company.

Prior to that, his personal health issues were his concern and his concern only.

4 Responses to “How healthy is Apple’s disclosure?”

  1. Brad Shorr Says:
    February 1st, 2009 at 4:28 am

    Hi Andrew, Welcome back. Hope you enjoyed your time away. Your position is well reasoned, but I lean toward the view that Jobs’ health is a public concern. Jobs is a special case in that people so closely link his personal involvement to the overall success of the company. If I were an Apple stockholder, I would need to know whether and to what extent Jobs would be directing the company. The answer to that question would drive decisions to buy, sell, or hold the stock. For this reason I believe Jobs has an obligation to be transparent – he is a public figure who is arguably his company’s most valuable asset.

    Brad Shorrs last blog post..Best of Word Sell, Posts 400-600

  2. Andrew Says:
    February 2nd, 2009 at 8:29 pm

    Thanks Brad, and sorry for the delayed response.

    You do have a point there – Jobs is no ordinary executive and he is very closely linked with both the identity of the company and its fortunes in the eyes of investors, and the market did move quite substantially in response to the announcement about the leave of absence.

    Perhaps there is an argument that Jobs is a special case, and perhaps Jobs could have been more forthcoming about his health issues during the period of time where he was losing weight and rumors about his health were circulating. If he was not certain as to the cause of it’s problem, as appears to have been the case, then he could have at least stated as much.

    That said, the company’s reasons for refusal to discuss this matter are quite understandable and I personally would not criticize them for this.

    I would, however, criticize them if it turns out that the initial statement on the matter was not accurate.

    Andrews last blog post..How healthy is Apple’s disclosure?

  3. Alina Popescu Says:
    February 6th, 2009 at 9:55 pm

    I have to say I tend to view Steve Jobs’ health as a public piece of information. Why? Because he is the ultimate guru, thought leader and entertainer at Apple. People worship him, look up to him, and Steve Jobs is Apple to their minds. I’ve read articles stating Apple will have serious issues maintaining their inventiveness and current appeal to the public without him. It is possible a lot of people buy Apple products or invest in the company because Steve Jobs inspires them, seems trustworthy or simply able to take the company further. He is the icon they depend on. Without him, they’ll be less inclined to buy Apple, products or stocks.

    As for the ethical issue, as long as the first release was not intentionally misleading, I cannot criticize it. It is very possible Mr. Jobs got good news at first and only found out it was worse after trying the simple treatment.

    Alina Popescus last blog post..SEO School – Learning and laughing at the same time

  4. drew Says:
    February 7th, 2009 at 9:48 am

    Hi Alina,

    Thank you for your comment and welcome to my blog.

    I guess Jobs is a large part of the identity of the company, and his presence as CEO inspires confidence, trust and freshness in the eyes of Apple customers in a similar way to the way in which Richard Branson is associated with the Virgin brand.

    One could quite well understand how further testing could quite possibly reveal problems which were more serious in nature than what was believed to be the case after the initial diagnosis, so it is quite possible that neither disclosure was misleading. Hopefully, the results of the SEC investigation should reveal whether or not this was indeed the case.

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