From time to time, a prominent CEO’s illness makes its way into the news and highlights once again one of disclosure’s trickiest issues. Most recently, Jamie Dimon, Chairman and CEO of JPMorgan Chase, disclosed that he has been diagnosed with throat cancer. This immediately became a top business news story, which is understandable given his prominence in the financial industry and importance to JPMorgan Chase. His announcement once more begs these age-old questions: what disclosure is required, what disclosure is appropriate even if not required and what disclosure is unnecessarily intrusive?
Thankfully, this is an issue most of us do not have to wrestle with very often, and certainly everyone wishes Mr. Dimon a speedy recovery. But CEOs are human, too, and they get sick just like the rest of us. Therefore, these questions are bound to arise from time to time, and it’s good not to be blindsided when they do.
Sometimes you read things like this quote from The New York Times: “Executives have no real legal obligation to tell the world they are sick.” (See, A Fine Line In Revealing The Illness of the C.E.O., July 3, 2014.) However, although there is no rule specifically requiring such disclosure, that statement is not accurate for CEOs of most public companies.
Instead, if the illness is such that it might reasonably be expected to materially impact the CEO’s ability to carry out his or her job, and assuming that the CEO is material to the company’s performance (which most shareholders would like to believe to be the case), then the CEO has a duty to report his or her illness to the board of directors in as much detail as will allow it to make an informed decision about whether, when and how disclosure should be made.
Of course, these things are not clear cut, and the CEO’s right to privacy must be taken seriously. It is not necessary, for example, to include a detailed medical report or even necessarily to disclose the exact nature of the illness in all circumstances. It seems to me that the degree of detail is as much a function of the CEO’s personality as it is pure disclosure analysis.
Arguably, Mr. Dimon provided more detail in his announcement than was necessary. He began by saying he had been diagnosed with throat cancer, his prognosis is excellent and his condition is curable. He also said his treatment would curtail his travel for approximately eight weeks, but he expects to remain actively involved in the company’s business during that time. All of that sounds forthcoming, was helpful from the market’s perspective and probably was about what was required under a materiality analysis.
Less necessary were the details Mr. Dimon provided about the type of medical tests he had taken, the location of his cancer, the name of his hospital and the specific form of treatment. However, he obviously wanted to provide more than minimal information, and there is nothing wrong with that. JPMorgan Chase received kudos for the transparency of the disclosure and everyone seems to feel they have the whole story, which may be reason enough to go beyond the minimum if the CEO is comfortable doing so.
This is in stark contrast to Apple’s now well-parsed, and frequently criticized, disclosures regarding Steve Jobs’ illness. One of several examples occurred some five years after Mr. Jobs had been diagnosed with pancreatic cancer and appeared wan at a public appearance. After that appearance, a company spokesperson said that Mr. Jobs had “a common bug. […] He’s been on antibiotics and getting better…. That’s all there is to it.” While it’s not my place to question the accuracy of this or other statements or decisions made during what had to have been an extremely difficult time, the market reacted poorly to what it perceived to be an intentional lack of transparency regarding the health of the iconic leader of one of the nation’s largest companies. (Two separate SEC inquiries into Apple’s disclosures were closed without action.)
Warren Buffet, who underwent prostate-related surgery himself three years later, summed it up pretty well, as he is wont to do, back in 2009 when addressing Apple’s disclosures:
“If I have any serious illness, or something coming up of an important nature such as an operation or anything like that, I think the thing to do is just tell Berkshire shareholders about it. I work for them. Some people might think I’m important to the company. […] So it’s a material fact.”
So, while this issue is far from simple, it’s inaccurate to say that the CEO’s privacy is paramount or that the rules do not require disclosure. Any time there is a reasonable possibility that the CEO’s (or perhaps another key executive’s) performance could be materially impacted by a pending illness, some amount of accurate, forthcoming disclosure is likely to be required.