Leadership

How to Handle a Sick CEO

By Jessica Stillman

Updated on: August 27, 2008 / 1:21 PM EDT / MoneyWatch

The Find: Executives facing a health crisis may have more pressing matters for their attention than the perfect strategy for announcing the diagnosis, but two experts warn there is a right way -- and a wrong way -- for a company to handle a sick CEO.
The Source: An interview with Steve London, the head of Pepper Hamilton LLP's Shareholder Activism Team, and James Post, a professor at the Boston University School of Management, on the NY Time's Freakonomics blog.

The Takeaway: When former cancer sufferer and Apple CEO Steve Jobs showed up at this year's worldwide developers' conference looking less than hale and hearty, Apple's stock promptly dropped. Sure, Jobs is central to Apple's success, and sure there may have been other factors in the stock price's decline, but the fact remains a CEO's health problems are bound to effect the company and its shareholders. And with recent research showing that a vast majority of companies fail to develop adequate succession planning, speculation about an executive's health woes is likely to be intense. So what are a company's legal responsibilities when a CEO is ill, and what steps are most likely to safeguard the company's continued success?

BU's Post says companies should air the news as soon as possible:

Once the diagnosis is made, it is important for a company CEO or board chair to make public the announcement, the therapeutic strategy, and the outlook. Secrecy and "no comment" are the worst courses of action.

Keeping quiet, according to Post, is both unethical and encourages speculation, which may have a more negative impact than the plain truth. But London points out companies are under no legal obligation to disclose: "A C.E.O.'s health is generally not one of the specific events required to be disclosed under the securities laws.... we also have a well-established but contradictory public policy that protects the privacy of our health and medical information, especially in the workplace." Still, if the boss's condition could effect his performance, it's best to announce immediately.

London warns, however, that though it might not be a legal requirement to disclose health information, "it's arguably a breach of fiduciary duty if directors fail to develop a succession plan when a C.E.O.'s health or future is questionable."

Post also offers a word of caution to C-suite executives: determination and ego may have gotten you to the top, but it might not be what's needed when dealing with a health crisis. Many bosses, Post feels, "underestimate the toll serious health issues can take on their leadership. Modern medicine is filled with miracles, but no leaders should underestimate how much personal time, attention, and energy it will take to fight a serious illness."

The Question: When does a health condition cross the line from a private battle to a matter for public disclosure?

(Image of doctor's tools by kokopinto, CC 2.0)