Steve Jobs is the public face of Apple, but that doesn't mean investors get to know every last detail about the CEO's health.
Jobs announced this week he is taking his third medical leave from the company he started in 1976.
No date was given for when he will return. No information was provided about what was wrong. No interim CEO was named, though Chief Operating Officer Tim Cook will be responsible for Apple Inc.'s day-to-day operations.
Apple didn't have to say more, according to legal experts, even though what happens to Jobs, 55, matters to its shareholders because he's considered the creative force behind the company.
Apple is in the spotlight now for its secrecy on Jobs' health, but other companies including American International Group and McDonald's have dealt with similar issues in recent years.
Here are some questions and answers about disclosure requirements:
Q: What are companies required to tell about an executive's health?
A: The short answer is nothing, unless the illness hampers the executive's ability to work. Then it would be considered "material information," which must be disclosed under the Securities and Exchange Commission's rules.
Even then, companies don't have to explain what is wrong. All Apple said was that Jobs was taking medical leave to focus on his health, he would remain CEO and he would be involved in the major strategic decisions for the company. No other specifics were given.
"He is a very revered leader and I think the public wants to know as much as possible," says Karen Brenner, a professor at New York University's Leonard N. Stern School of Business. "But other than understanding how his availability is going to be altered, there is not much more he needs to disclose at this time."
Q: What is meant by "material information"?
A: The SEC requires companies to disclose information that would affect an investor's decision to buy or sell a stock. That includes information regarding corporate earnings, mergers and acquisitions, new products and contracts, changes in auditors, bankruptcies and events relating to investments in a company, including dividends and stock repurchase plans. Companies must also disclose information relating to their top executives, including compensation, stock ownership, securities transactions and biographical data.
Beyond that, companies must disclose to the public when a CEO retires, dies or leaves a company. That is why Apple had to acknowledge that Jobs was taking a medical leave of absence.
Q: Do the SEC rules lay out exactly what circumstances need to be disclosed regarding an executive's health?
A: Not at all. "The rules are confusing and not straightforward," says Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware. "There is a lot of room for interpretation of what needs to be disclosed."
Jeffrey Sonnenfeld, a professor at the Yale School of Management, says Apple kept its latest disclosure tight and to the point, unlike two years ago when it waivered on Jobs' health.
After months of playing down concerns over his health, Jobs said in January 2009 that his severe weight loss was a result of a treatable hormone imbalance. Nine days later, he announced he was going on a leave of absence for six months. Then in June of that year, The Wall Street Journal, not Apple, revealed he had a liver transplant two months earlier.
"They've taken the approach this year that they aren't going to say anything beyond the minimum that meets their legal compliance," Sonnenfeld says.
Q: Who gets to decide if corporate disclosures are good enough?
A: It is up to the SEC to monitor whether companies make proper disclosures.
Q: Isn't Jobs' health something Apple's investors accept when they buy the stock?
A: Not necessarily, Elson says. Investors who bought the stock since the cancer was first disclosed in 2004 had to consider his health. But Elson points out that Apple may have investors who bought the stock long before that.
Elson also says that the reason for disclosure rules is to make sure material information is "fully and fairly" disseminated. "We don't want there to be exceptions to the rules for individual companies," Elson says. "The American (regulatory) system requires disclosure on the part of everyone."
Even though Apple doesn't have to disclose more, shareholders might respond positively to an increase in transparency.
"It can be in your best interest to disclose more, because then it gives shareholders less opportunity to guess," says Frank Bulter, a professor of management at the University of Tennessee at Chattanooga and co-author of the recent academic paper, "When the CEO is Ill, Keeping Quiet or Going Public."
Q: How have investors reacted to Apple's news — and lack of it?
The company's stock has fluctuated along with Jobs' health since 2004, when he first disclosed he had cancer, but the latest announcement didn't have as big an effect as some analysts had predicted.
On Tuesday, Apple's shares slid $7.83 a share, or about 2.3 percent, to $340.65 in the first day of trading on news of Jobs' leave of absence. It made some of that back in extended trading after Apple reported strong quarterly results.
The decline was sharper — nearly 12 percent — between Jan. 5, 2009, the day Jobs said his weight loss was due to a hormone imbalance, and Jan. 15, the day after he said he will go on medical leave for health problems that were more complex than he thought. The stock's value has quadrupled since, and Apple's market capitalization is now second only to Exxon Mobil Corp. among public U.S. companies.
Q: Are other companies currently dealing with the disclosure of health issues differently?
A: Alexa Perryman, a professor of management at the Neely School of Business at Texas Christian University, points to American International Group. The insurance giant, which is owned largely by the U.S. government, disclosed in October that CEO Robert Benmosche had cancer. The company did not say what kind of cancer but said he was undergoing chemotherapy. It also said he was continuing a normal schedule.
Two days after the announcement, the company said it was reviewing its succession plan in case his status changes. It said that the chairman of the board, Steve Miller, would become interim CEO until a long-term replacement was named if that action becomes necessary.
"AIG made a nice step forward with its disclosure," says Perryman, who co-authored the paper on CEO illness disclosures with Butler.
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