Should Steve Jobs' liver transplant have been reported to Apple shareholders?

It’s been a point of argument on Slashdot for quite a while now, ever since it was confirmed that Jobs had a liver transplant.

Side A: This information was materially relevant to Apple’s stock price, and Apple withheld it, either by omission or outright lying. That’s very serious wrongdoing, maybe even illegal.

Side B: So that should override Jobs’ right to medical privacy?

Side A: That’s the life he chose, being the head of a publicly traded company, and making his influence and image so powerfully linked to it. Apple was merely trying to keep their stock from going down (as it did when the rumors first came out). That’s very shady.

Side B: Then why not force all CEOs release their DNA so shareholders can examine it for disease, and require video cameras in their homes, so we can make sure no domestic strife is affecting their performance? Where does it stop?

So what do you think of all this, both from a legal and an ethical standpoint? Certainly, we’re all more sensitive to CEO wrongdoing these days, but I’m kind of torn on this.

Everybody who’s only slightly interested in Apple stock knew that Jobs had some health issues. As far as I can see, the only reason people are so obsessed with Jobs’s health, is because he’s seen as pretty much essential to Apple’s continuing success. Nobody would care if he’s be “just a CEO”.

As far as I can see, Jobs should have the same right to medical privacy as any normal CEO would have. Investing in a company does not grant you a right to any and all information that might possibly influence your investment - but the law might disagree with me. Besides that, I personally think that Apple might possibly do surprisingly well should Jobs kick the bucket tomorrow. He’s not as essential to Apple’s success right now as he was when he was re-hired.

No, it should not.

a) Job was on a leave of absence after complications from cancer surgery. Effectively, at that point, he was not part of the company. He was pretty sick. That’s all investors really needed to know to make their decisions. If anyone was betting that it was a slam dunk that Jobs would return or that his treatment would be uncomplicated, then they probably shouldn’t be putting their money in the stock market.

b) Apple is a hundred billion dollar company with 35000 employees. Steve Jobs is a bright guy but you don’t get to be a company that size without a pretty good talent pool and some promising arms in the bullpen. Jobs may be setting the direction of the company but he isn’t the guy designing the products or writing the code. If Apple falls apart without Steve Jobs, then the Board of Directors and the company officers are not doing their jobs. They’ve had plenty of time to line up talent and plan for the Job-less future.

One interesting thing about some of the arguments I’ve read so far is that (b) is irrelevant - there may be plenty of important faces behind the company, but Jobs is the most visible and lauded, and thus has the most effect on stock prices. They say that the dip in the stock a few months ago I mentioned is proof. Should stockholders, they ask, take a hit like that because they didn’t have the information they needed to avoid it, even if it is, at core, a little irrational on the market’s part?

Absolutely not.

The idea that something having a material effect on stock prices is sufficient to require public notification is absurd. Everything that particularly visible figures do can have potentially material effects. Hell, there are often significant material changes to stock prices based on nothing that anyone can even name. Stockholders need to suck it up as part of the vagaries of the market.

The company only had an obligation to let the public know that Jobs’ was unavailable for personal reasons. They don’t even owe it to anyone to mention whether the reasons are medical. The only thing that public companies owe their shareholders is acting in good faith to provide the information that’s required by law. Anything else is entirely at their discretion.

Since this is GD, I’d be interested in your basis for believing that U.S. public companies are within their rights to withhold material information from their shareholders. No, they are not required to notify the public of every event that is material to the company’s stock price, but they are required to disclose all material nonpublic information of which they are aware. If the CEO of a public company is no longer able to fulfill the duties of that role, even temporarily, the public company is certainly required to disclose that information to its shareholders (under Item 1.01 (or perhaps Item 8.01, depending) of Form 8-K, to be precise).

I’m not sure about the specifics of the Apple situation, so maybe the information had already been disclosed in one form or another. Not necessarily the specifics of his condition, but certainly the extent of his capacity to lead, and the status of the company’s leadership.

A company should not have any obligation to reveal the health status of its officers or employees. Likewise, stockholders do not have any obligation to maintain the price of the company’s stocks. If they don’t like the lack the information from a company, their recourse is to sell the stock. If a company doesn’t want its stock value to fluctuate because of news reports, then its recourse is to give its stockholders more information.

The only reason the government needs to get involved is if there’s fraud.

Any person can drop dead tomorrow. Setting a precedent that an employee’s health information is the property of a corporation is frankly horrifying.

If Jobs is so important to Apple that health problems would seriously hurt the company, then it would be stupid for an investor to invest in Apple irrespective of whether or not he’s sick. Jobs is, after all, 54 years old, which isn’t all that old but is well into the period of a man’s life when he could have a heart attack or develop an aggressive cancer. He could be killed in a car accident tomorrow.

If you believe Apple would be that damaged by the loss of Jobs, then you’d have to admit the corporation’s a house of cards in the first place, ready to collapse upon the death or absence of one man. So, frankly, the scary information is not that Jobs is sick, but that his being sick could be that bad for Apple. (Not that I believe it’s true, but that’s the logical conclusion.)

Medical information is and should remain private.

I’d bet Apple employs some pretty good securities lawyers and knows how to interact with them effectively. Therefore, the fact that they didn’t disclose it at least presents a prima facie case that disclosing it is not legally required, and being “legally required” is all the “should” I think matters. Therefore, absent some securities law expert telling me that this type of info is required to be disclosed, I’m happy believing that Apple was under no obligation to do so.

Wow. I actually agree with you.

Jobs has had pancreatic cancer. That he has survived that this long is extremely unusual, even well nigh miraculous and having a liver transplant is no where near as ominous of a medical condition as that already extant diagnosis. Essentially Apple’s stock price has had the probability that Jobs will be dead at any time priced in for a long time now.


is quite a strange statement. “The dip in the stock”? In case you didn’t notice Apple is not the only stock that had dipped some. What is notable in fact is that Apple, a consumer discretionary, had weathered the dips so well. Relative to the indices Apple is up for a rolling year, and way up for ytd (60%, compared to 17% for NASDAQ and 2% for the S&P500).

Legally I doubt that there is any requirement to inform the public of any employee’s health issues unless perhaps one knew that such would have a substantial adverse impact on the stock price and used that information to sell a position in anticipation of that drop. In that case keeping the information private would not have been the issue; trading on that inside information would be.

Ethically, maybe if Apple was all about Jobs, there would be an obligation to inform, in some general terms, about major changes in his prognosis and likely capacity to return to the helm. But there has been no major change to his prognosis (other than that the longer he lives the less likely it is that his cancer will be what kills him) and Apple is now far past being about him. His death tomorrow would be a few days of a blip, nothing more.

As an aside, I meant the price going down (10%, I think?) a few months ago when some message board or something first leaked the news. I’ll have to research to recall the details.

You may be referring to this

But after hours trading means little at most. It opened regular trading the next day at 80.57, reached a high of 84.12 that day and closed back at 80.05. It had been already going down from its then recent 96.75 just 10 days earlier (1/5), bottomed out at 78.20 just two trading days later, within a few more it closed back up higher than it was before the news and within the month closed over 100. It is now over 140 half a year later, up 65% from the close before the news first leaked. All while he was on a medical leave that many presumed he would never return from.

The market reaction to Jobs’ leave was to continue the same decline it was already on for only two more days and to then promptly recover and to recover briskly, to say the least.

Jobs’ health is not all that material to the health of the company at this point in time. Although I wish him well, his health has no impact on my decisions as a holder of Apple stock (for many many years, back when the iPod just came out) and I doubt that many other investors feel much differently.

First a history lesson, rather simplified. Jobs and Wozniak founded the company in the middle 70s and, after a rocky beginning, it flourished. Woz left and, at first Jobs stayed, but the shareholders threw him our and brought in a soda executive as CEO. Woz was a certifiable software and hardware genius whose leaving appeared to have little effect, but Jobs was–and is–a marketing genius and within 10 years, the company was going down the tubes. The board revolted and sent the CEO away and brought Jobs back. The company has totally flourished since then.

Now I believe that a company has an obligation to shareholders to keep them informed of all information relevant to the value of their shares. The fact that most don’t means I am extremely reluctant to invest in stocks. Sure insider trading is illegal but is impossible to police. Now the fact that Jobs took a medical leave might be taken as sufficient warning to sharholders. That is the real question and I can see it could be argued both ways. I am resonably certain that that conforms to the letter of the law, but less sure it conforms to the spirit. He is not the cookie-cutter rent-a-CEO. But news like this spreads, albeit mavbe slowly, and there is much opportunity for insider trading. (“You sold your shares on April 30 and found out only on May 1, how convenient.”) All I can conclude is that in the interests of transparency, they should have done it.

You clearly know more about the regulations in this area than I do. I was speaking of my personal ethical views. However, I don’t see why you think the above is inconsistent with what I wrote.

I said: “The company only had an obligation to let the public know that Jobs’ was unavailable for personal reasons”, which they did, and “The only thing that public companies owe their shareholders is acting in good faith to provide the information that’s required by law.”

It sounds like Apple was required to publicly announce that Jobs would be absent from company management, which they did, but that the specifics of his health are immaterial.

I say absolutely. If Steve Jobs wants his health to be a private matter, then Apple should have remained a private or closely held company. When he offered stock in the company to be sold to the general public, he owes the shareholders an honest and frank assessment of everything and anything which could affect stock values.

So, no officer of a public company has a right to any privacy at all?

Do we have a right to know about his sex life because a scandal could cause a stock price change?

Do we have a right to his kids’ genetic testing because he might have to leave the company to care for them?

Do we have a right to sit in at a confessional because he might reveal some corporate malfeasance to the priest?

If he is high profile to the point where his departure would adversely affect stock prices, then no.

It is a bit of a stretch to think that a sex scandal involving a CEO could affect stock prices. I can’t see a scenario where it would.

I should have included the qualifier “reasonable” in my statement. Just because his kids MIGHT have something is not reason enough. Something definite like a liver transplant is in a different ballpark.

Yes. No, but seriously, if he is committing corporate crimes, we already have a remedy for that.

I think according to GAAP and the full disclosure principle, ethically Apple should disclose Jobs’ health. Its material, its likely, and it carries risk for the firm. (BTW, the majority of firms have a different position regarding their CEO - Apple and Jobs are tied together more than most).

I think that according to basic human ethics, Jobs’ health is his business.

I think that legally Apple is probably in the clear not making any statements and the SEC won’t have an issue with not disclosing it. GAAP leaves you with a lot of choices while still being legal.