"Forget all the debate about how much disclosure Apple should provide on Steve Jobs's health," Martin Peers wrote this week in The Wall Street Journal's Heard On the Street column. "Apple shareholders have to ask themselves just one question: If Mr. Jobs suddenly wasn't at Apple, for whatever reason, would they want to own the stock?"
A fine question, but here's the rejoinder: How in the world can Apple Inc. shareholders assess the probability of that scenario with the information they've been given? Indeed, far from settling the disclosure debate, Apple's continuing obfuscation risks setting a precedent that will allow companies to leave shareholders guessing when a key executive falls ill.
Let's start by getting one thing out of the way: The top executives of publicly traded companies have fewer privacy rights than the rest of us. Their pay is disclosed so the investing public can judge whether the companies are making judicious use of shareholder resources.
Similarly, to judge a company's prospects the availability and ability of executives to devote their full time and energy to the job is something investors need to know.
Can you name another company where this is truer than Apple? President Tim Cook, Mr. Jobs' fill-in, seems to be an exceptionally able operating executive. Yet nobody says it is he who has Mr. Jobs' seeing-around-corners vision for consumer desires. Nor do they say he is, as CNBC's hyperbolic Jim Cramer described Mr. Jobs, "a combination of Thomas Edison, Henry Ford and Sam Walton."
Yet we are now in the third go-round of inadequate disclosure about Mr. Jobs' health. In August, 2004, Mr. Jobs announced the removal of a cancerous tumour after surgery. In June, 2008, after Mr. Jobs' spectral appearance prompted speculation that the cancer had returned, an Apple spokeswoman told The Wall Street Journal the CEO has "a common bug." Months later, Mr. Jobs first said he had a hormone imbalance, then announced a six-month leave of absence. Only near the end of that leave did The Wall Street Journal report he had had a liver transplant.
Now, Apple has announced another leave of absence, this one open-ended, and Mr. Jobs' "hope" that he can return. We don't have any information of what Mr. Jobs is facing, and when he learned he's facing it, so we can only "hope," too.
John Coffee, a specialist in corporate governance at Columbia Law School in New York City, says most securities lawyers believe that executive health can be material information – meaning that it meets the requirements for disclosure – "and no case is clearer than Apple's."
But "in large part, the problem is that the Securities and Exchange Commission has never given clear guidance," he says, and "the SEC may be reluctant to bring an enforcement action where they have never articulated a clear position."
The SEC is believed to have made an inquiry into Apple's 2009 delayed disclosures of Mr. Jobs' health, but in the current case, unlike that one, "there is no evidence of a delay; the problem this time is that while the market now knows that there is a health problem, it does not quite know what that problem is," Mr. Coffee said.
Canadian securities regulators, meanwhile, haven't had as obvious a problem as Apple's lack of disclosure. But after-the-fact disclosure of a CEO's health issues does happen here: Toronto-Dominion Bank's Ed Clark revealed in December, 2009, that he'd just returned from missing a month of work due to back surgery. Mr. Clark has also had prostate cancer and heart problems; if he has health problems in the future that take him out of the executive suite, TD's shareholders should know before, not after.
Companies take out "key person" life insurance, pay their executives millions, and warn shareholders in the risk factors sections of securities filings that the loss of members of their top teams can have an adverse effect on the stock price. All of that suggests executives are important, and that their health is material. Yet "privacy" still seems to be trumping disclosure.
And if the SEC can't or won't make the easy case against Apple, there's little hope for any company's shareholders ever getting the straight story.
Special to The Globe and Mail