Steven Jobs and His Health Issues: Corporate Governance (Part 3)

We are examining the news that Steve Jobs is taking medical leave at Apple.  He issues a letter on Jan. 14 announcing the decision.  This came a bit over a week after he issued a letter suggesting that his health problems were under control and that he would remain as CEO during the recovery period.  As the earlier letter noted:

• The remedy for this nutritional problem is relatively simple and straightforward, and I’ve already begun treatment. But, just like I didn’t lose this much weight and body mass in a week or a month, my doctors expect it will take me until late this Spring to regain it. I will continue as Apple’s CEO during my recovery.

We have examined the two letters and concluded that it is unlikely that they violated the antifraud provisions of the federal securities laws.  With respect to corporate governance, however, some have suggested that Jobs did not disclose enough information or should have explained "the medical likelihood" of his returning in June.

It is easy to say that shareholders should always know more.  In this case, however, they actually know quite a bit.  They know that Jobs is ill, that he doesn't entirely know what will happen, and that right now, he expects to be back in June.  Presumably if that changes, he'll tell the market.  That he might have a more serious condition or that the condition might relate to his battle with cancer is obvious enough. 

At the same time, the market needs to know that there is a succession plan in place.  There is always a risk a CEO will depart (whether for medical or personal reasons).  With Jobs, the risk is more immediate.  Assuming, however, that the company has in place a reasonable plan of succession (Jobs had handpicked many of the top officials at Apple and Tim Cook, his replacement during the medical leave appears highly respected), principles of good corporate governance do not require that he release his medical records or provide substantially more information than he has given.