Apple Faces Issues of Disclosure

Rumors, and Realities, of Jobs's Health Affect Company Financially

With Steve Jobs's health problems now defined as
With Steve Jobs's health problems now defined as "more complex," he is taking medical leave from Apple until June. (By Justin Sullivan -- Getty Images)
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Washington Post Staff Writer
Friday, January 16, 2009; Page D01

As Apple chief Steve Jobs's weight loss over the past eight months has provoked questions about his health, the company's meager public disclosures of his illness have wandered from "common bug" to an undefined "hormone imbalance" to this week's something "more complex."

Exactly what is ailing the company's charismatic chief executive has never been rendered clear, however, and nor have his chances for a complete return to health.

But with Wednesday's announcement that Jobs would be taking a medical leave of absence until June, the argument that the company has a duty to discover and disclose his health status has grown more persuasive, business and legal experts say.

Under federal securities law and court decisions, a public company has an obligation to disclose a fact in its filings if "there is a substantial likelihood that a reasonable shareholder would consider it important," as a 1976 Supreme Court decision said.

And now that it is known that Jobs's illness can prevent him from carrying out his role at the company, his ailment is clearly something that a reasonable shareholder would consider important and therefore should be revealed, some experts said.

"Now that he is taking a leave of absence, that argument is over," said Joan MacLeod Heminway, an associate law professor at the University of Tennessee, who practiced securities law and wrote a recent journal article on the subject. "When the CEO is an iconic figure like Jobs, the company is much more likely to be forced to disclose private information."

Jobs is viewed as an almost indispensable element of the company's most successful product designs, analysts said, and his loss would be a significant setback.

The obligation to disclose the information may lie with the company's board and not necessarily with Jobs, however. "That's where the missing link is: Jobs does not have a requirement to disclose the facts of his personal health to the board," Heminway said.

She said the board may now be legally obligated to investigate and, if necessary, publicly report his health status, however.

"Knowing what they now know, it would be a violation of their fiduciary duties to not ask Jobs to report on his health," she said.

Other chief executives who have faced serious or potentially serious ailments have handled the disclosures in different ways.

When Warren E. Buffett, chief executive of Berkshire Hathaway, was diagnosed with polyps in his colon in June 2000, the company quickly announced that he would have surgery to remove them. Buffett is a director of The Washington Post Co.

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