Was Apple 'Adequate but Late' on Jobs?

Apple (AAPL) investors got answers to some of their nagging questions about the health of the company's chief executive, Steve Jobs, on Jan. 5 when Jobs disclosed in a letter that he is suffering from a hormone imbalance that has caused rapid weight loss over the past year.

In the letter, published on Apple's Web site, Jobs said doctors had determined the cause of his weight loss to be "a hormone imbalance that has been 'robbing' me of the proteins my body needs to be healthy." The remedy is "simple and straightforward," he said, adding that he's begun treatment and will remain CEO.

Some shareholders were cheered by the disclosure, and Apple shares rose 4.2%, to 94.58.

Late Spring Recovery Expected

But some corporate governance experts questioned whether Apple said as much—as early—as necessary. On Dec. 6, when Apple said Jobs would not make his customary speech at the annual Macworld Expo in San Francisco, the company didn't cite health as an issue. Instead, Apple said the company will not participate in future Macworld events and that Apple Vice-President Phil Schiller will deliver the Jan. 6 address. Earlier in the year, in a published interview, an Apple spokesperson attributed the executive's apparent weight loss to a "common bug," and the company later called Jobs' health a "private matter."

Joe Grundfest, co-director of the Arthur and Toni Rembe Rock Center for Corporate Governance at Stanford University, says securities lawyers could "get a good debate going" over whether Apple was as forthcoming as necessary. "Some will say this is good enough, and some will argue that we finally have disclosure and that it's adequate but late," Grundfest said.

Another question raised by the disclosure is how much more Apple may be compelled to say on the issue. Will the company need to make regular updates on the executive's health? In his letter, Jobs writes that his doctors "expect it will take me until late this spring to regain" lost weight and body mass. What if it takes longer? Jobs didn't want to say even as much as he did. "I've said more than I wanted to say, and all that I am going to say, about this," he wrote at the conclusion of his letter.

Different Approaches by Grove, Buffett

Securities laws require that publicly traded companies disclose facts that are "material," but arguments rage over what constitutes material, Grundfest said. "Suppose Jobs were losing weight and it didn't interfere with doing his job, but he didn't know why he was losing weight," he says. "What's the board of directors to do? Say that the CEO is losing weight and it doesn't know why?"

Strictly speaking, Jobs isn't required to disclose much. The rules on disclosure of a key executive's illness, while arguably material information as far as investors are concerned, are weighed against privacy laws and standards. Various CEOs have acted differently over the years. When then-Intel (INTC) CEO Andy Grove was diagnosed with prostate cancer in 1995, the company didn't immediately disclose the fact, but Grove did so the following year by writing an article for Fortune magazine about his experience combating the disease. When Warren Buffett, CEO of Berkshire Hathaway (BRKA), underwent surgery to remove benign polyps from his colon in 1997, he chose to disclose the circumstances to his investors and release details of his succession plan.

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