Steve Jobs Leave Of Absence Raises Questions About Privacy Rights of CEOs

By Ren LaForme, guest columnist for ‘In Good Practice’ – January 21, 2011

As one of the most prolific CEOs in the business world, Steven P. Jobs has led Apple Inc. on a journey of Sisyphean proportions.

Apple’s stock (Nasdaq: AAPL) was essentially worthless in 1997 when Jobs retook the CEO position of the company he founded in a garage with friend Steve Wozniak 20 years earlier. With the forging of the iMac all-in-one computer; the ubiquitous iPod and the corresponding iTunes store; the iPhone, which introduced the term “app” to the world; and last year’s iPad, Jobs has led Apple through a period of unprecedented financial growth. Apple stock is now second only to Exxon Mobile in market capitalization[1].

But, like all good things, Apple’s seemingly endless upward spiral must eventually end. Some investors think that time might be now.

On Jan. 17, Apple issued a media advisory that Jobs was taking a medical leave of absence from the company[2]. “At my request, the board of directors has granted me a medical leave of absence so I can focus on my health. I will continue as CEO and be involved in major strategic decisions for the company,” the statement, written by Jobs himself, said. The news blazed across the Internet, raising speculation from tech blogs and investment sites, even pushing stories about Wikileaks and the collapsing government in Tunisia off of the front page of the New York Times website.

The Apple CEO’s medical health has made headlines before. In 2004, then 49-year-od Jobs had a cancerous tumor removed from his pancreas3. Through the prognosis for pancreatic cancer tends to be negative, Jobs missed only a month of work.

The spotlight on Jobs grew over the next several years with the launch of new and exciting models of iPods, Macs and the iPhone, and some noticed that Jobs looked gaunt and unwell. In January of 2009, Jobs announced that he was taking a six-month leave of absence from Apple, stating, “…my health-related issues are more complex than I originally thought”[4]. Later that year, Jobs announced that he had undergone a liver transplant, and his prognosis was “excellent.”

That Jobs provided neither a timeline or specific medical details about his most recent leave has raised massive heaps of speculation in the financial world. With Apple at the top of the heap, and with Jobs playing a decisive role in that rise, some investors claim that they have a right to know the details regarding the CEO’s health. In his statement, Jobs said “my family and I would deeply appreciate respect for our privacy” but that did not stop the New York Times from digging a little deeper. The day that Jobs announced his leave, the Times reported that Jobs suffers from “frequent ups and downs” as a result of his liver transplant, and had begun a down cycle in recent weeks[5].

Apple’s stock took a hit after the announcement, the financial world being the fickle creature it is, but the hit was mitigated by a stronger-than-expected earnings report issued on Tuesday morning. As of Jan. 20, Apple’s stock was down by only three percent[6].

Still, the case raises provoking questions about the privacy of company leaders. Corporations are required to provide shareholders with annual financial statements and other information so they can weigh the value of their investment.

However, when a company seems to lean heavily on one or two corporate leaders, should investors also be kept abreast of those leaders’ health and status in the company? Who would hold the responsibility if Jobs left Apple and the stock crashed – Apple, for not updating shareholders on the CEO’s health; or shareholders, for investing money in a company that relies on the guidance and leadership of a sole, mortal human being?

There are a handful of rules laid out by the Securities and Exchange Commission that address these questions, though not to an extent that some investors would like. SEC rules state that companies are not required to disclose anything about an executive’s health “unless the illness hampers the executive’s ability to work”[7]. Note that this does not require companies to say what is specifically wrong with the executive. This is the route that Apple has taken with Jobs in the past, and this is the route they are taking this time.

In fact, former SEC chairman Arthur Leavitt spoke about the legality of Jobs’ departure, saying the information given was “sufficient for investors”[8]. He even went as far as to criticize shareholders who have griped about the lack of information regarding Jobs’ illness.

“It’s easy to criticize the board, but I think the reality is that someone who owns Apple stock has got to be deaf, dumb and blind not to know that Jobs has an illness that can reoccur at any time,” he said, in a Bloomberg interview.

With no strong regulations currently in place, it is up to investors whether Apple stock is worth the risk. Apparently, as seen by its soaring value in the past decade, many investors think that it is. And even if Jobs ultimately does not return to his company, Apple still has an impressive catalog of products to build upon in the future and a strong leadership, handpicked by Jobs himself, to foster further growth. Investing is always a risk, but investing in Apple stock might just be a surer bet than ever.

Sources

1) http://www.businessweek.com/news/2010-05-26/apple-overtakes-microsoft-in-market-capitalization-update3-.html

2) http://www.macrumors.com/2011/01/17/steve-jobs-taking-new-medical-leave-of-absence/

3) http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2004/08/02/MNGMJ816F41.DTL

4) http://www.apple.com/pr/library/2009/01/14advisory.html

5) http://www.macrumors.com/

6) http://www.marketwatch.com/story/apple-shares-cheap-despite-sharp-gains-2011-01-20?reflink=MW_news_stmp

7) http://www.denverpost.com/business/ci_17142200

8) http://www.appleinsider.com/articles/11/01/20/ex_sec_chief_says_apple_has_disclosed_enough_about_health_of_steve_jobs.html

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