Announcing CEO’s illness
Surrounded as we are by mounting illness, some malingering, some sudden among business executives, one wonders how to handle the disclosure especially when the success of the enterprise has been dependent on that business leader. If the market sees how the company has set succession plans well, the decision on how and when to inform the public is not as difficult as when the company is unprepared for the sudden departure of the boss.
I came across Davia Temin’s article in Forbes. com which has some useful observations. She finds the regulations regarding public companies’ need to announce the serious illness, impending death, death or unplanned retirement muddy to which I would think it worse in the Philippine jurisdiction. The former US SEC Chairman Harvey Pitt came up with options in an article “Rules for Disclosing a CEO’s Unexpected Absence.” It shows that up to now there is no standard. Companies put the announcement on their website and provide the press a statement when there is an inquiry. Rare is the company that has their spokesperson make the announcement and answer the press. Others just keep quiet and let the obituaries page deliver the message.
Yet in this age of transparency there seems to be a greater need for full and timely disclosure. Executive resource is as important as the financial resources and as the public is provided audited financial statements on a regular basis, should not the public be fully informed of the state of health of key executives? A general statement in the annual report would be the minimum. Where the CEO is undergoing a serious illness, regular medical bulletins should be issued. These should be a must for public companies.
Privacy concerns do come in. The CEO has the right to his or her privacy. In instances, the health condition is publicly seen–loss of weight, marked weakening, less public appearances. However, the public also has the right to know. How does one balance these two seemingly conflicting interests? It may be necessary for newly elected CEOs to sign a disclosure agreement in their employment contract. In the end, public interest is paramount.
Temin writes that timing is important. “Few companies disclose a terminal, but not immediate, illness immediately. In the best cases, the companies do seem able to take the time to do it right, strategically and delicately. They emphasize succession planning, their deep bench, interim plans, and concern and appreciation for the ill CEO. The worst instances, of course, are when companies lie, obfuscate, and/ or never make an announcement at all.”
Some companies seen as doing right are: McDonald’s, Imation and Southwest. McDonald’s Charlie Bell after succeeding Jim Cantalupo who died suddenly was diagnosed with cancer communicated to the employees and shareholders and the company announced a succession plan. Imation received good words from analysts after promptly disclosing Bruce Henderson’s treatment for a malignant tumor with shares largely unaffected by the corporate announcement. Southwest’s Herb Kelleher chose to disclose treatment for prostrate cancer and made quips. Upon the “bombshell” announcement that he was sick, the stocks barely budged.
I go along with Temin’s advice that “a company should proceed with kindness and humanity, while guarding shareholder value, transparency and best practices.” And what holds true for a company’s CEO, should hold true for the President of the Philippines.
melito.jr@gmail.com