Business Horizons (2010) 53, 2129

www.elsevier.com/locate/bushor

When the CEO is ill: Keeping quiet or going public?

Alexa A. Perryman a, Frank C. Butler b,*, John A. Martin c,
Gerald R. Ferris d
a

Neeley School of Business, Texas Christian University, TCU Box 298530, Fort Worth, TX 76129, U.S.A.
College of Business, University of Tennessee at Chattanooga, 615 McCallie Avenue, Chattanooga,
TN 37403, U.S.A.
c
United States Air Force Academy, USAFA/DFM, 2354 Fairchild Drive, Suite 6H-130, USAF Academy,
CO 80840-5099, U.S.A.
d
College of Business, Florida State University, 821 Academic Way, Tallahassee, FL 32306-1110, U.S.A.
b

KEYWORDS
CEO health;
Disclosure;
Shareholder wealth;
Succession

Abstract CEOs represent the pinnacle of leadership in organizations. In addition to

power and prestige, constant media scrutiny and pressures to exceed past levels of
firm performance are often associated with this role. Although CEOs may rely on other
top managers for input regarding operational decisions and long-term planning, the
outcomes of strategic initiatives rest solely on their shoulders. Moreover, how CEOs
are depicted in the press can greatly affect public opinion about their organizations.
In recent years, CEO health and health concerns have made headlines for such wellknown companies as McDonalds, Clorox, Pilgrims Pride, and EarthLink. In this article
we discuss the ramifications of disclosure and non-disclosure of serious CEO health
issues, and their potential impact on shareholder wealth and succession planning. We
conclude by offering a few thoughts about the future direction of CEO health.
# 2009 Kelley School of Business, Indiana University. All rights reserved.

1. To disclose or not to disclose: That

is the question
Ive just learned about his illness. Lets hope
its nothing trivial. Lord Byron, Don Juan
In sickness and in health. . .til death do us
part. traditional American wedding vows

* Corresponding author.
E-mail addresses: a.a.perryman@tcu.edu (A.A. Perryman),
frank-butler@utc.edu (F.C. Butler), john.martin@usafa.edu
(J.A. Martin), gferris@cob.fsu.edu (G.R. Ferris).

Chief Executive Officers (CEOs) are often considered to be the public face of their corporations.
Given the visibility of their position, CEOs arguably
face more challenges regarding how the public will
view their health. As inferences about personal
characteristics of CEOs can be reflected onto their
firms (Rindova, Pollock, & Hayward, 2006; Sutton &
Callahan, 1987), the health of CEOs can be viewed as
a reflection of the health of their organizations by
the market. As a result, serious illnesses, such as
cancer and heart conditions, may trigger concerns
from shareholders and market analysts about the
organizations stability and future directions.

0007-6813/$ see front matter # 2009 Kelley School of Business, Indiana University. All rights reserved.
doi:10.1016/j.bushor.2009.08.006

22
CEOs are under constant pressure to ensure the
financial health of their organizations (Arthaud-Day,
Certo, Dalton, & Dalton, 2006). CEOs who fail to
meet performance expectations are often removed
from office. As evidence of this trend, CEO turnover
has increased in recent years, with 35% of all turnover being classified as forced (Lucier, Kocourek, &
Habbel, 2006). Although numerous studies by research groups document CEO turnover, the extent to
which these turnovers occur as a result of healthrelated reasons is unknown.
Health issues may be an underlying factor in both
voluntary and forced departure, as CEO resignations do not require statements indicating the rationale behind the decision. In particular, health
issues have the potential to result in overinflated
numbers with regard to forced departure. Empirical
literature has defined forced turnover as any CEO
vacating the position who is under the age of 60 and
did not list health, or appointment at another firm,
as the reason, regardless of the actual intent (e.g.,
Clayton, Hartzell, & Rosenberg, 2005; Parrino,
1997; Weisbach, 1988). This suggests that not all
forced turnover may actually be forced. Given
that rules establishing guidelines for CEO health disclosures are currently not in place, it becomesin
varying degreesthe choice of CEOs, top managers,
and boards of directors to announce retirements
for health reasons, as well as general health
announcements (e.g., heart attack, surgery).
To examine the current frequency in which health
issues have been reported, a search was conducted
for relevant articles published between January
2000 and September 2008 in The Wall Street Journal. This search resulted in articles with 29 CEOs
citing health reasons in their retirement announcements, including CEOs of both major (e.g., Sprint,
KPMG) and lesser-known (e.g., PeaPod, Post Properties) companies. In addition to the 29 cases of CEO
retirement for health reasons, 37 more articles were
found which addressed individual CEO health conditions such as hospitalization and cancer diagnosis.
Although these numbers are small in comparison to
yearly CEO turnover, they are significant in that
these are only the cases that have been made
public. Taken together, this represents 66 instances
whereby CEOs have chosen a path of disclosure.
In light ofand, perhaps, even as a result of
these findings, one cannot help but wonder how
many times CEOs have viewed their health as a
wholly private matter, as regards not only shareholders but also the board. Moreover, what effect
can health disclosures (or a lack thereof) have on
shareholder wealth and succession planning? Some
CEOs have chosen to wait until after they felt a
health condition was manageable to announce it to

A.A. Perryman et al.

shareholders, as was the case with Jack Welchs
angioplasty and Steve Jobs pancreatic cancer. In
other instances, as those involving Progress Energys
Bob McGehee and Dana Corps Joseph Magliochetti,
the medical condition was announced at the time of
the CEOs death.
To help address the issue of health disclosures, we
herein discuss the current state of the CEO position
and the role health concerns may have in shaping
how CEOs are viewed; this notion is extended to the
U.S. presidency such that suggestions may be made
regarding CEO illness policy formation. In addition,
we analyze the current legal mandates surrounding
corporate disclosures, and subsequently explore the
implications CEO health can have on succession
planning and organizational stability. Finally, we
conclude by offering a few thoughts on the future
direction of CEO health disclosures.

2. A focus on health in the C-suite

Executive health has been a topic of increasing
public interest, attracting the attention of academics and practitioners alike; consider, for example,
Forbes magazines May 15, 2008 special report on
executive health, as well as the May 2000 Academy of
Management Executive focus on executive health.
Over the last 4 years, the health issues of CEOs at
Apple, McDonalds, Clorox, and other publicly-traded
firms have been highlighted by the business press. In
particular, McDonalds had to contend with the health
issues of not one, but two CEOs, in less than a 2-month
period. The illnessand, in some cases, subsequent
deathof CEOs raises questions regarding personal
privacy, corporate disclosure, succession planning,
and the fiduciary responsibility of the board to shareholder interests.
For McDonalds, CEO illness hindered the companys strategic direction. Although he had a heart
condition, Jim Cantalupo came out of retirement to
help turn around McDonalds public image of being
unhealthy. The campaign was showing success, with
the company demonstrating signs of consistent
growth under his leadership, when Cantalupo suffered a heart attack and died suddenly in April of
2004. To continue on the winning path set forth by
Cantalupo, McDonalds named then-Chief Operating
Officer (COO) Charlie Bell as Cantalupos successor.
Only 1 month into his tenure, however, Charlie Bell
was diagnosed with cancer and began treatment for
the condition. He left the McDonalds CEO position
that November and died the following January.
Depending on the severity of the condition, illness can affect CEOs ability to perform the day-today obligations of their job. In cases when surgery

When the CEO is ill: Keeping quiet or going public?

23

and subsequent recuperation time are needed, who

will manage and oversee operations can lead to
questions about the firms future. Additionally,
many medical conditions increase the risk of future
health concerns in the form of secondary/related
maladies or relapses. Although the importance of
CEOs has been debated with regard to firm performance (Andrews, 1971; Cannella & Monroe, 1997;
Child, 1972), the title of CEO remains the most
powerful executive position in a firm. CEOs are
the most visible and pertinent strategic managers,
responsible for guiding both the formation and implementation of strategies. Similar to other individuals, CEOs are viewed as boundedly rational in their
decisions, which ultimately affect firm outcomes. As
a result, firms can be viewed as reflections of their
top managers (Hambrick & Mason, 1984).
The media has contributed to this association
of firms and CEOs being intertwined (Hayward,
Rindova, & Pollock, 2004; Rindova et al., 2006).
Media coverage of CEOs has increased for both positive and negative reasons. In some instances, narcissism, greed, and illegal actions have brought
corporate CEOs into the spotlight and tarnished their
image, garnering government actions focusing on
ethical standards and transparency (e.g., SarbanesOxley). In other cases, distinctive actions and innovation have drawn attention to, and increased the
prestige of, this role. Either way, the close linkage of
CEOs and firms suggests that the market will pass
judgmentbe it positive or negativeon CEOs stepping down or taking a leave of absence for health
reasons. Consequently, at high levels of interconnectedness, the poor health of CEOs is even more likely to
translate to poor health of their firms in the eyes of
the press, the public, and the market as a whole.
As evidence of this trend, interest in CEOs has been
shown to even include speculation about their
health. Apple CEO Steve Jobs battle with pancreatic
cancer in 2004 was well documented by the media.
When Jobs appeared thin and gaunt at a World Wide
Developers Conference in July of 2008, rumors of
Jobs taking one of his extreme vegan diets too far
turned quickly to speculations regarding whether or
not his cancer had returned. Apples public stance on
Jobs health as being a private matter only fueled
speculation and served to lower the companys stock
price 10%-17% in the short term. To date, Apple and
Jobs remain firm in the view that health is a personal,
rather than public, matter (see Afterword).
Whereas legislation such as the Health Insurance
Portability and Accountability Act of 1996 (HIPAA)
supports general rights to medical privacy, not all
employees are created equal. Depending on factors
such as industry and position, employees and job
candidates are required to disclose personal infor-

mation. For example, as compared to the average

employee, CEOs do not share the same right to
privacy regarding trading shares of company stock
or disclosure of salaries, bonuses, and options. We
suggest that the examination of an even more highprofile leadership role, the United States presidency, may help shed light on how to shape policies
regarding CEO illness.

3. What you give up to be at the top

In general, CEOs can be classified as well-paid public
figures. Based on differences in power, prestige,
compensation, and visibility, CEOs should not have
the same expectations for privacy as do average
company employees. Rather, CEOs should expect
more scrutiny, accountability, and transparency regarding their actions and behaviors, particularly in
this post Sarbanes-Oxley era.
As public figures, issues of CEOs health and
privacy can be compared to that of government
officials, given the nature of their role and the
weight their decisions have on numerous stakeholder groups. By viewing an organization as analogous
to a government, the role of CEO is comparable to
that of the president. In this light, historical analysis
of U.S. presidential health handlings may provide
insight regarding how CEO health disclosures should
be structured.
In United States history, 1955 is not linked with any
particular international issue or domestic crisis.
Importantly, however, that year can be viewed as a
starting point for U.S. awareness of presidential
health (Messerli, Messerli, & Lu
scher, 2005). On
Saturday, September 24, 1955, President Dwight D.
Eisenhower suffered a massive heart attack. By Monday morning, details of this event had reached Wall
Street. In response to the news, on September 26th
the Dow Jones dropped 6.5%, which equated to the
largest total paper loss since July 1933 (Lasby, 1997).
Although no formal, legal mandate exists, there
is a precedent for all presidential candidates to
release their medical records; consider Bob Dole,
who did so in 1995, when he celebrated his 72nd
birthday. More recently, John McCain came under
increased pressure to release his medical records to
the press, with much of the concern over his health
stemming not only from his age, but also his survival
of 3 plane crashes, 4 melanomas, and more than 5
years as a prisoner of war. Since the health of a
leader is viewed by the general public and media
alike as a major determinant in that individuals
ability to successfully lead, candidates who are not
forthcoming about their health can be called into
question. This was the case in 1992 with Bill Clinton,

24
who was described by Lawrence Altman in The New
York Times as being less forthcoming than any
presidential nominee in the last 20 years (Altman,
1992a). The following day, Clinton made a public
promise to provide his medical information to the
media, and did so 5 days after the original article
was published (Altman, 1992b, 1992c).
Guidelines dealing with presidential health, and
the procedures and requirements for the vice president to assume the presidency in the event that the
president is temporarily or permanently disabled,
are outlined in the 20th and 25th amendments of the
U.S. Constitution. In the event of a temporary disability, such as a severe illness, the president may
decide the length of the term of leave. If the
president cannot communicate this decision, or if
the presidents ability to serve is disputed, Congress
must decide within 21 days and by a two-thirds vote
of both the House of Representatives and the Senate. In short, longstanding policies and precedent
underscore the importance of leadership and the
accountability leaders have to those whom their
decisions and actions affect.
The comparison for current and future CEOs to
both United States presidents and presidential candidates emphasizes how poor health can affect the
ability to lead and cause concerns over future stability. Further, even though presidential candidates
are not legally mandated to discuss their health,
they can be pressured to do so by both historic
precedence and their peer group. This suggests that
even if governing bodiessuch as the Securities and
Exchange Commission (SEC)do not step in to provide guidance, CEOs themselves can choose to take
a path of voluntary disclosure.
In addition to precedence, the 20th and 25th
amendments underscore the importance of succession planning, as well as the value of having a
contingency plan in case an emergency does occur.
Regarding CEOs, prompt disclosures of health concerns provide organizations more time to form
unified plans, which aid in ensuring a path consistent
with the desired strategic direction. Moreover, such
plans can also help assuage concerns over organizational stabilityfrom both internal and external
constituentsby addressing who will lead the organization, and for how long.

4. By the book: What the law says

A companys board of directors has both a legal and a
fiduciary responsibility to understand all factors
that affect the CEOs ability to handle the role
and remain in power. The SEC requires disclosure
of a variety of events and conditions which affect a

A.A. Perryman et al.

companys and its shareholders future; included
among these are financial risk from climate change,
named executive officer compensation, and known
trends and uncertainties affecting liquidity and capital resources. The overarching principle of the SEC
is that publicly-held companies must disclose any
material information that can affect the market
valuation of a firm to the market, the government,
and current and potential shareholders. However,
the SEC lacks specific guidelines regarding executive
health disclosures, thus leaving companies to decide
what does and does not constitute material information.
Although companies can be viewed as maintaining considerable discretion over what information
must be disclosed, this is not universally true. Rule
10b-5 of the Securities Exchange Act of 1934, formally titled Employment of Manipulative and Deceptive Practices, deals with the prohibition of any
and all acts and omissions that result in fraud or
deceit in connection with the purchase or sale of any
security, including insider trading. Under this ruling,
it is noteworthy that insider trading is currently
limited to those with a fiduciary responsibility to
shareholders; this includes top executives. Such
executives face risks of civil and criminal charges
when trading their firms securities, because they
may be privy to material or nonpublic information
about the firms future that has the potential to
generate both positive and negative abnormal trade
returns.
Based on the definition of the word material
from the U.S. Supreme Court (1976) Case TSC Industries v. Northway, it can be argued that CEO
health qualifies as material information. Specifically, this case notes that an omitted fact is material
if there is a substantial likelihood that a reasonable
shareholder would consider it important in deciding
how to vote (426 US 438, p. 449). The purpose of
this definition was to allow meritorious lawsuits
while simultaneously preventing shareholders from
being overwhelmed by enormous amounts of company information. With regard to CEO health, this
definition suggests that if a serious health condition
(various forms of cancer, massive strokes, or other
medical conditions) could influence the decision of a
vote, then it should be viewed as relevant and
material information that should be made public
to shareholders.
Beyond this rule, companies may feel bound to
disclose. This certainly was the case when Tennecos
CEO, Michael Walsh, was diagnosed with brain cancer. Tennecos leadership felt an obligation to disclose information about its CEOs health in order to
preserve and reinforce the culture of candor, clarity,
and credibility it embraced. Toward this end, the

When the CEO is ill: Keeping quiet or going public?

25

firm even went so far as to release a 3-page report

which included the prognosis, survival rate, and a
2-page letter from the companys physician to
Tennecos directors (Carey, Ogden, & Roland,
2000). This course of action greatly aided in reducing
speculation and restoring investor confidence, and
stood in stark contrast to the measures takenor, not
takenby TLC Beatrice. Around the same time that
Michael Walsh announced his illness, TLC Beatrice
disclosed that its Chairman and CEO, Ronald Lewis,
had a similar condition and was in a coma. Lewis
passed away just one day after that statement.
Without doubt, the disclosure of a potentially
life-threatening condition needs to be handled with
care, as disclosures affect the CEOs reputation and
family, as well as the corporation and its shareholders. Illness, debilitating health conditions,
and even rumors of poor health can throw a business
into internal emotional turmoil and external turmoil
with regard to market valuation. In short, CEO
health concerns can lead to what investors and
the market fear most: uncertainty. The uncertainty
brought about by health issues raises concerns regarding continuity in leadership, potential successors, and the companys overall strategic direction;
these represent strong signals to the financial marketplace, and are likely to influence stock valuations.

nouncements about a CEOs health or rumors pertaining to CEO health. For example, Apple realized a
10% loss (approximately $16 billion) in its market
capitalization over rumors of Steve Jobs facing another battle with cancer. If a relationship similar to
CEO death exists between health concerns and market-based metrics of firm performance (e.g., stock
price), a CEOs healthboth before and during his or
her appointmentbecomes a viable concern to
stakeholder groups.
Whereas the sudden death of a CEO is typically a
rare occurrence, health concerns are likely to be
more commonplace. Age and death are logically
correlated, but disease, sickness, and other maladies do not share the same strength of correlation,
because they can be a product of stress, heredity,
and lifestyle. If the CEO position is to be viewed as
one of true leadership, then the physical demands of
the job should be considered along with other demands (Hambrick, Finkelstein, & Mooney, 2005).
This suggests that current CEOs, as well as those
in consideration for the position, should be accountable to inform their respective boards if they are
incapable of meeting all the demands of the position. From a legal perspective, health becomes
particularly critical when searching for a new
CEO. The Americans with Disabilities Act prohibits
asking about a candidates medical history after an
offer for employment has been made. Although this
does not preclude firms from asking for or insisting
on a physical, it does accentuate the need for boards
not to presume candidates are in good health simply
because they look healthy.
The largest factor mitigating who will replace the
CEO is whether or not a current succession plan is in
place (Shen & Cannella, 2003). Regardless of whether CEO illness is viewed by the CEO or the board as a
temporary or permanent disability, someone must
fill in while the CEO is undergoing treatment. Logical
internal candidates to fill this role generally consist
of the president, COO, or the board chair (Cannella
& Shen, 2001; Combs et al., 2007). However, CEOs
frequently serve dual roles. In the case of illness or
death, losing the CEO often can mean losing the
board chair or the president, as well.
This presents an additional challenge in filling the
role on an interim basis, as was the case when Fred
SmithFounder, Chairman, and CEO of FedEx
underwent heart bypass surgery in late 2000. While
Smith recovered, a four-person executive vice president committee was commissioned with filling his
role (Brooks, 2000). This team-based approach underscored that, at the CEO level, it can take more
than one person to fill the role even on a temporary
basis. Further, this level of involvement was viewed
as necessary because Smiths surgery came at a time

5. You dont know what youve got

until its gone
It has been suggested that one of the most important
and impactful tasks that falls to a board of directors
is choosing an individual to lead the firm (Dalton,
2006; Lorsch & MacIver, 1989; Vancil, 1987). One
stream of scholarly work often grounded in succession is how CEO death affects stock price, as death
offers a glimpse into how the market retrospectively
views an organizations CEO. Although succession
events can be viewed as adaptive, destructive,
or non-consequential responses to organizational
life, in the case of CEO death the succession
process typically has greater potential to be a destabilizing force to the organization. Effects of CEO
deaths on firms stock price have been examined at
various intervals and, on average, have shown CEO
death to be met with negative market reactions
(e.g., Borokhovich, Brunarski, Donahue, & Harman,
2006; Combs, Ketchen, Perryman, & Donahue, 2007;
Friedman & Singh, 1989; Worrell & Davidson, 1987).
Although research has yet to determine if CEO
health concerns produce similar impacts, newspaper articles have noted changes in stock priceand,
subsequent company valueas a result of an-

26
when FedEx was trying to expand into other delivery
services, and was in talks with the U.S. Post Office
about sharing deliveries.
Organizations also can find themselves in a particularly difficult situation when newly-named CEOs
leave for medical reasons; this happened at Idearc,
a spin-off of Verizon Communications, in 2008.
Idearcs CEO, John Mueller, resigned after just over
1 week as CEO and approximately 2 weeks as Chairman, citing unforeseen health reasons, leaving
Executive Vice President Frank Gatto as interim CEO
while a new search was conducted (Edwards, 2008).
This announcement was particularly troubling because Idearcs status as a public company was linked
in the business press to Muellers leadership. Further, Idearcs shares were off by approximately 80%
as a result of increasing competition. Despite
Gattos knowledge of Idearcs inner-workings,
Muellers departure threw the company into a
scramble to find a permanent replacement. Idearc
eventually identified an external candidate with
experience in turnaround and reinvention strategies
to fill the vacancy.
Even when an heir apparent does exist, the illness
or sudden loss of the CEO can cut short the time
needed to fully groom the heir for the role, or can
call into question the validity of the succession plan
in place. Former Chairman and CEO of Time Warner
Steven Ross battle with cancer underscored the
difficulties involved in succession planning while
ill, and highlighted the fact that such problems
can continue after the CEO has passed away.
Although the merger of media giants Time and
Warner had been signed years before, it had not
yet reached a conclusion in the boardroom at the
time of Ross announcement that he would begin
cancer treatment. Then-current co-CEO, N.J.
Nicholas, was set to take over the duties in full
after Ross scheduled retirement in subsequent
years, but after clashes with Ross over the vision
and direction of the merged company, Nicholas was
removed and replaced with another Time executive,
Gerald Levin. Levin deferred to Ross until his passing, but shortly after that, Levin began restructuring
the board to align with his plans for the company.
The departure of eight board members, all of whom
were viewed as loyal to Ross vision for Time Warner,
fueled speculation in the business press that these
changes were necessary in order to guarantee
Levins full succession to the CEO position.
One way that organizations may prepare for coping with unforeseen illness involves maintaining two
lists for handling emergency situations: a list of true
potential successors, and a list of ready replacement or emergency successors who may step into
the role at a moments notice. Two lists also allows

A.A. Perryman et al.

for viable candidates that are both internal and
external to the organization. Research has supported the notion that organization performance
can drive the decision to hire an internal or external
candidate. Specifically, internal successors can promote loyalty, stability, and continuity of leadership,
whereas external successions generally are viewed
as change agents, who promote new perspectives
and ideas for poorly performing firms (Hambrick &
Mason, 1984; Lauterbach, Vu, & Weisberg, 1999).
This second, or contingency, list can offer an
extra layer of protection against uncertainty and
instability. As mentioned, even when traditional
succession planning is in place, heirs apparent
may not be ready to assume the role. Contingency
plans, which are formed when the organization is in
a period of stability, allow the CEO and the board to
help choose viable candidates who can serve should
an emergency arise. However, a contingency plan
must be a living document that is openly discussed,
rather than existing in name alone. The illness and
subsequent death of L-3 Communications CEO,
Frank Lanza, underscored the difficulties that arise
when CEOs do not fully inform their companies of
personal health issues, and have neither a succession nor a contingency plan in place.
In May of 2006, Lanza publicly stated that he had
undergone esophageal surgery to remove scar tissue
caused by acid reflux. One month later, however, the
CEO died unexpectedly. Autopsy results revealed
the cause of death as esophageal cancer, leading
to questions regarding the degree to which board
members were aware of the severity of Lanzas
condition. While in office Lanza refused to name a
successor, saying that he would begin to choose an
heir in earnest once he was within a year of retirement. He also was quoted as saying the executives
at L-3 would be more than capable of conducting
business without him. While there was talk of the
board having in place an emergency succession plan,
it took the group 3 days to appoint the firms finance
chief, Michael Strianese, as the interim successor;
this delay led investors and the business press to
wonder if a plan had ever actually existed. Months
later, Strianese was elected fully to the CEO
position, as well as named president and elected
to the board.
CEO health concerns clearly emphasize the need
for continuous succession planning. Increased media
attention, coupled with greater public awareness
and a push toward a climate of disclosure, suggests
that health problems are likely to become more
difficult to hide. It may be wise for companies to
proactively address how CEO health issues should be
handled, rather than find themselves in the reactive
position of dealing with a health-related disaster

When the CEO is ill: Keeping quiet or going public?

27

and no plans to guide action. Moreover, a proactive

stance on CEO health has the potential to result in
positive press and continued investor confidence
despite a change, or potential change, in leadership.

a lack thereofaffects shareholders by examining

organizations that fall into one of three categories:
organizations that have experienced a recent, unexpected death of the CEO where no disclosure was
made; organizations where disclosures came after
the death of the CEO; and organizations where the
CEO is ill and the condition has been preemptively
disclosed.
Further, we suggest that the SEC ought to directly
classify the health of the CEO as a material fact
requiring disclosure. The threshold for disclosure
should be any illness that results in the CEO being
unable to work for an extended period of time, or
any illness that has the possibility of shortening the
lifespan of the CEO. For example, there are many
treatable forms of cancer with high rates of remission. However, for those individuals the risk of
cancer reoccurring, and other serious conditions
developing, increases. In cases such as these, shareholders and the market should be made aware of the
health of the CEO, as illness can threaten not only
the continuity of leadership, but also the strategic
direction of the organization.
In line with disclosure, it is recommended that
CEOs receive annual health screenings. Factors that
could contribute to the need for leaves of absence,
the impairment of decisions, or the possibility of
death, should be shared withand be closely monitored bythe board. Although a broken arm can
make daily tasks more difficult, it is a highly visible
ailment, and one that does not require legal disclosure. However, cancer, heart-related issues, and
other potentially chronic illnesses often exhibit no
visible symptoms. It is these symptomless conditions that have the greatest influence on the
ability to perform that should require disclosure.
Concerns over CEO health disclosures on the part
of shareholders, investors, market analysts, and
other groups are nothing new. However, the issue
of CEO health and disclosure in the management
literature has not been openly discussed for quite
some time. Our hope is that, through revisiting this
issue, dialogue will be reinvigorated, particularly
with regard to the business climate and landscape
post Sarbanes-Oxley.
Unfortunate as they may be, health scares can
serve as a barometer regarding how CEOs are viewed
by the market. As our introductory quotes suggest,
CEO health typically is not disclosed until the condition has reached a critical stage. In turn, at advanced stages of declining health, leader succession
concerns often weigh heavily on both companies and
investors. We suggest a proactive stance on CEO
health as a means to encourage vigilance in corporate transparency, succession planning, and a focus
on shareholders rights.

6. Health prescriptions: Future

directions for CEO health disclosures
While there are most likely strong advocates on both
sides of the argument, we suggest that CEOs medical rights to privacy must be balanced with a responsibility to both investors and employees, as well
as be in compliance with current SEC regulations.
Additionally, the desire for medical privacy also
must be balanced with the need to prevent rampant
speculation about the severity of an undisclosed
condition. Taken together, this suggests that CEOs
facing potentially life-threatening conditions, or
those showing a general inability to physically function and execute the demands inherent to corporate
leadership, are examples of relevant facts that
would seriously influence stock purchase or divestiture by reasonable investors. As a result, we argue
that any illness or condition which (1) immediately
endangers the life of the CEO; (2) requires a lengthy
absence; (3) shortensor has the potential to shortenthe lifespan of the CEO; or (4) impacts the CEOs
ability to reliably perform his or her job function;
constitutes an event or condition that affects the
organizations future and wealth, and therefore
should be disclosed publicly.
The SEC requires CEOs to disclose when they
trade shares of their own organizations stock,
and if their health conditions could affect voting,
it can be viewed as material information that must
be disclosed. Investors entrust their wealth to those
who lead firms, and in turn expect them to provide
return on their investments. Consequently, buying
shares in an organization can be viewed as entering
into a partnership. Thus, by agreeing to public
trading of stock, we suggest that CEOs cannot expect a right to absolute privacy when it comes to
serious health conditions that have the potential to
affect their organizations future and those purchasing stakes in that future.
On the whole, empirical literature and anecdotal
evidence from the business press suggest that CEO
death negatively affects shareholder wealth. We
posit that this is likely to hold true for CEO illness,
as well. In fact, illness has the potential to bring
about more uncertainty than death because it can
represent a reoccurring phenomenon in the life of a
CEO. This being the case, it is recommended that
the SEC take an in-depth look at how disclosureor

28

A.A. Perryman et al.

Afterword
On Friday, June 19, 2009, The Wall Street Journal reported that Steve Jobs had received a liver transplant
some 2 months prior. Although Jobs was slated to return by the end of June to his role as CEO of Apple, the
news raised questions regarding not only Jobs capability to lead the company, but also Apples knowledge
and obligation to inform shareholders of the severity of Jobs condition.1 Chronologically speaking, Jobs
went on medical leave in January of 2009 for what was labeled as a hormonal imbalance; in April, he
received a liver transplant for what has been speculated as a metastasized neuroendocrine tumor. On one
hand, it can be argued that this time gap suggests Jobs doctors, Apples board of directors, and Jobs
himself were unaware of the severity of the condition at the time of his medical leave. On the other hand,
it suggests that Apple and Jobs felt a liver transplant was not a serious enough medical condition to be of
concern to a typical shareholders decision to buy, sell, or maintain the companys stock. The latter
argument seems difficult to substantiate as Apples stock price decreased in the days following the
transplant announcement, despite its being made on a Friday after the markets closed. Regardless of
interpretation, the continuation of this example underscores a need for SEC regulations defining health as
material information and suggests the need for stipulations regarding worsening conditions after medical
leave is taken. Without such regulations, companies must decide for themselves whether a medical
condition is relevant and, in turn, shareholders must extend the warning of caveat emptor to their stock
portfolio.

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