Sponsored by Oregon Business

What are the rules when the CEO gets sick?

| Print |  Email
Monday, January 01, 2007

Worst-case scenario: A company’s CEO gets diagnosed with cancer and decides to keep the illness a secret. A few co-workers begin to notice that the CEO seems sick and isn’t working as much as she did a few months ago. Rumors begin to swirl internally and in the media. Company share prices plunge based on pure speculation.

What should this CEO have done at the moment of diagnosis? Whatever she wanted, says Mary Ann Franz, partner at Miller Nash in Portland, who, after searching for past lawsuits that may have set a precedent on the subject of CEO health disclosures, found nothing specific on the books. “While companies traded on the New York Stock Exchange and NASDAQ must disclose material information under SEC law, the health of an executive doesn’t fall into that category,” Franz explains.

Without specific legal obligations to disclose major health problems, CEOs and companies release such sensitive personal information based on need, which can include simple rumor management.

Generally, health concerns are considered private, personal issues, says Thomas Jones, a professor at the University of Washington Business School, but the delineation doesn’t always apply to executives. “Presumably, executives should have some right to privacy, but when they take those positions and are paid truly enormous amounts of money, privacy becomes secondary,” he says.

Just as mergers and holdings affect a company’s value, an executive’s health could shape the business’s performance. That reality should prompt executives to consider disclosure under certain circumstances, Jones says. “I think they should usually opt for disclosure,” he explains. “Because of the highly public nature of their positions, there are huge potential consequences that come with life-threatening health problems.”

But life threatening could mean anything from a cancerous mole to leukemia. How and when CEOs choose to release health details rests with them and, if they choose, with members of their company.

“It depends on the CEO more than anyone else,” says Franz.

Franz notes that when executives resign, they have more of a legal responsibility to disclose why they’re leaving as defined by SEC code. But that doesn’t mean resignations always reveal the truth. “Many health-related resignations are actually code for, ‘We don’t want to tell you why he’s leaving,’” she says.

But when executives stay despite real health problems, they face tough choices. In 2004, Apple CEO Steve Jobs underwent surgery to remove a cancerous tumor from his pancreas. In a pre-emptive move, Jobs sent Apple employees an e-mail from his hospital bed to announce he would be taking a month off to recover from the surgery. Most likely, Jobs, a notoriously private person, admitted to the illness to protect his company from harmful speculation that could have decreased stock values. And the announcement created an action-rather-than-reaction scenario, a common public relations strategy designed to maintain an image of power and control.

For Tripwire founder and CEO Wyatt Starnes, choosing to reveal his health conditions followed recovery from a major illness. After being diagnosed with throat cancer in 2003, Starnes took a temporary leave of absence from the Portland-based security software company while he was being treated for the disease.

Four months after he returned to work, Starnes resigned, citing health problems. A local paper reported that Starnes revealed his health problems in reaction to rumors that he was fired. “I’m wearing myself out,” he said at the time. “It’s time to go heal myself.” Starnes later founded SignaCert, a Portland computer security company. He declined to comment for this story.

During the past few years, it’s been difficult to deny the implications of serious health conditions at the executive level: Frank Lanza, a chief at L-3 Communications, died from cancer; Skip Ackerman, president and CEO of Panacos Pharmaceuticals, died of a heart attack at age 58; in 2004, McDonald’s CEO Jim Cantalupo died of a heart attack.

Issues of succession and stability have forced shareholders to become increasingly savvy when it comes to hiring CEOs. Now, many executive screening processes include full physical examinations in addition to the more standard hiring procedures.

For executives interested in making the ultimate pre-emptive strike by staying healthy,  hospitals around the country offer thorough physicals designed for executives. In Oregon, ODS Companies offered an executive evaluation program at Oregon Health & Science University, but recently canceled the program because of lack of interest.

While local executives might be taking their health into their own hands, staying healthy could mean avoiding ambiguous legal and ethical territory in the long run.

— Lucy Burningham

Have an opinion? E-mail This e-mail address is being protected from spambots. You need JavaScript enabled to view it


More Articles

The Cover Story

Linda Baker
Thursday, August 27, 2015
01-cover-0915-thumbBY LINDA BAKER

How do you put a baby on the cover of a business magazine without it looking too cutesy?


Inside the Box

September 2015
Wednesday, August 19, 2015

Screening for “culture fit” has become an essential part of the hiring process. But do like-minded employees actually build strong companies — or merely breed consensus culture?


Photos: 100 Best Nonprofits to Work For in Oregon awards dinner

The Latest
Thursday, October 01, 2015
100best202thumbPHOTOS BY JASON E. KAPLAN

Images from the big 2015 celebration of worker-friendly organizations that make a difference.


Counterpoint: CLT not as green as people think

Contributed Blogs
Wednesday, September 16, 2015
photo-flickr-glasseyes viewthymbBY GREGG LEWIS | OP-ED

The issue of green-washing remains a significant challenge to those of us who would like to see the building sector in this country do more than make unverifiable claims of sustainability. Transparency about the impacts of a given material is the only way to allow designers to make intelligent choices when selecting building products.


New green wood building product takes off in Oregon

Thursday, September 10, 2015
091115-cltjohnson-thumbBY KIM MOORE

Oregon is set to become a hub of a new type of wooden building design as a southern Oregon timber company becomes the first certified manufacturer of a high-tech wood product, known as cross-laminated timber, or CLT.


100 Best Nonprofits announced

Wednesday, September 30, 2015

1015-nonprofits01Oregon Business magazine has named the seventh annual 100 Best Nonprofits to Work for in Oregon. The rankings were revealed Wednesday night during an awards dinner at the Sentinel Hotel in Portland.


Big Trouble in China?

Guest Blog
Tuesday, August 18, 2015
0818-wellmanthumbBY JASON NORRIS | CFA

Earlier this month, the People’s Bank of China (PBoC) announced they were going to devalue their currency, the Renminbi. While the amount of the targeted change was to be roughly 2 percent, investors read a lot more into the move. The Renminbi had been gradually appreciating against the U.S. dollar (see chart) as to attempt to alleviate concerns of being labeled a currency manipulator.

Oregon Business magazinetitle-sponsored-links-02