Home Back Issues January 2007 What are the rules when the CEO gets sick?

What are the rules when the CEO gets sick?

| Print |  Email
Archives - January 2007
Monday, January 01, 2007
MedicalScales.gif

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

College Hacker

September 2014
Wednesday, August 27, 2014
BY KLINT FINLEY

Treehouse CEO Ryan Carson builds a 21st-century trade school.


Read more...

Green Endeavor cleans up

News
Wednesday, August 06, 2014
080614 ULnew greenendeavorBY LINDA BAKER | OB EDITOR

Portland startup Green Endeavor strikes gold, inking a partnership with Underwriters Laboratories, an Illinois-based consulting and certification company with offices in 46 countries.


Read more...

Two sides of the coin

Contributed Blogs
Monday, August 25, 2014
0825 thumb moneyBY JASON NORRIS | OB GUEST BLOGGER

Ferguson Wellman’s investment views on the economy and capital markets.


Read more...

Private liberal arts education: superior outcomes, competitive price

Contributed Blogs
Tuesday, August 26, 2014
0826 thumb collegemoneyBY DEBRA RINGOLD | OP-ED CONTRIBUTOR

Why has six years become an acceptable investment in public undergraduate education that over-promises and underperforms?


Read more...

Register for 100 Best Companies survey

News
Wednesday, August 20, 2014
OBM-100-best-logo-2015 150pxwBy Kim Moore | OB Editor

The 2015 survey launched this week. It is open to for-profit private and public companies that have at least 15 full- or part-time employees in Oregon.


Read more...

Is this employee right?

Contributed Blogs
Wednesday, August 13, 2014
081314 thumb employeefeelingsBY TOM COX | OB BLOGGER

When I say, “Your Employee is Always Right,” I do not mean “right about the facts,” but rather “right about how they feel” and “right about how they want to be led.”


Read more...

Fast Food Slows Down

September 2014
Tuesday, August 26, 2014
BY KIM MOORE

The ubiquitous fast-food restaurant may be on the decline.


Read more...
Oregon Business magazinetitle-sponsored-links-02
SPONSORED LINKS