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INTIMATIONS OF MORTALITY: WHAT HAPPENS WHEN THE CEO FALLS ILL?

Granted, CEO Steve Jobs' creative vision is inextricably linked to Apple's image. The man is Apple incarnate. But Jobs is mortal - a fact drummed into public awareness by the media hubbub over his health - while the company is not (at least, not in the same way).

It seems that even Apple's board has difficulty separating the man from the organization. Of course, the board members care about their CEO's health and well-being, but they aren't responsible for it. They are, however, responsible for taking care of the company and its stakeholders.

Under current federal law, the board is obligated to "disclose information that is 'material' - i.e., facts a reasonable investor would need to know in order to make an informed decision," according to Dana Radcliffe, business ethics lecturer at Cornell University (Radcliffe, 2009). At the same time, it's illegal for a company to make anyone - CEOs included - relinquish his or her rights to medical privacy in order to keep his or her job (Joni, 2009). Therefore, boards can face a dilemma when CEOs fall ill: whether to help protect the CEO's privacy or to urge greater transparency about such health issues.

That dilemma may have been particularly acute for Apple because of the way Jobs and company leaders have promulgated his position as Apple visionary, as the irreplaceable guru behind its success. Yet the board was tight-lipped, disclosing nary a word about his illness and prolonged treatment for pancreatic cancer in 2004. Jobs waited nine months before undergoing the prescribed surgery to remove a tumor. All was kept secret until he announced his brush with death and his restoration to health in a companywide e-mail. Apple stock dropped only 2.4% when the news went public (Elkind, 2008).

Since then, however, subsequent scares over Jobs' health have sent shares falling. Macintosh News reported that a rumored heart attack in October 2008 toppled Apple's market value by $4.8 billion in the opening hour of trading ("Report," 2009). Once again the board seemed to waffle on the serious state of Jobs' health: One week the CEO announced that he was merely suffering a hormonal imbalance, and just a week later, on January 14th, the board reported that Jobs was taking a six-month medical leave. That triggered a 6.42% drop in shares (Caulfield, 2009).

So, what can corporations do to cope with such difficult decisions? For one thing, they can plan for such contingencies in advance. Succession planning can include not only lists of possible successors but also plans for dealing with these types of dilemmas, including how to communicate with the media and stockholders and how to deal with privacy issues. Anyone who takes the top job may want to consider in advance whether she or he would be willing to voluntarily give up rights to medical privacy in order to boost transparency for the public and stockholders (Joni, 2009).

Every situation is different, of course, but McDonald's - an i4cp member organization - experienced some similar difficulties not so long ago when its CEO, Charlie Bell, was diagnosed with colorectal cancer within days of succeeding Jim Cantalupo, who had died of a sudden heart attack. McDonald's announced its lineup of successors when Bell became too ill to travel to a managers' gathering in Australia (Alexander, 2004).

While not wishing to dispense advice to other companies, Jack Daly, McDonald's senior vice president of corporate relations, offered to share with i4cp his company's approach to dealing with that uncertain time. "We never considered anything but transparency. It was the right thing to do, not only as a public company but as a worldwide brand committed to ethical practices. In this spirit, we also provided updates about Charlie's health to keep relevant information in the public domain."

One step that Apple has taken is to communicate that it has a succession plan. "There is a succession plan in place," Apple spokesman Steve Dowling said last month. "But it is confidential for obvious reasons." He acknowledged that the plan has been in place for several years ("Apple," 2009). Jobs told Fortune magazine in 2008 that the juggernaut company is structured in such a way that it would continue to perform well if he were to leave suddenly. His strategy, he said, is to surround himself with capable employees, so that if he were to depart unexpectedly, "it wouldn't be a party, but the board would have some good choices about who to pick as CEO. My job is to make the whole executive team good enough to be successors" (Morris, 2008).

Apple does not need to reveal proprietary particulars to share information about its succession plan. Faculty members at the Wharton School of Business at the University of Pennsylvania wrote that, because of the link between Jobs and Apple's identity, finding a successor will likely be a challenge. Apple may be working toward making changes in management, according to a Wharton analysis of the 2009 Macworld conference keynote speech delivered by Apple senior vice president Phillip Schiller - a speech normally given by Jobs.

Some believe Apple should be more forthcoming in its succession plan, and the Wharton faculty has some suggestions to help make Apple's plan a success:
  • Put prospects on display, and make the internal succession candidates more recognizable to customers, investors and partners.
  • Make sure there's vetting by the board of each serious prospect in the pipeline.
  • Be transparent enough to alleviate customer and investor speculation but not so much as to create performance issues caused by departures of those who learn that they're not a finalist.
  • Maintain a strong corporate culture that endures beyond any CEO's departure ("Job-less: Steve," 2009).
i4cp's Recommendation: Although every corporation experiences unique situations, the one thing they can all do is contingency planning. These days, succession planning isn't just about picking potential successors but about examining what the company would do - in regard to communications, operations, and stockholders - given a variety of scenarios. As difficult as it may be to have these conversations, it's almost certainly better than the alternative of being caught unprepared.

Documents used in the preparation of this TrendWatcher include the following:
  • Alexander, D. (2004, November 11). McDonald's vets set to assist. Retrieved from baltimoresun.com
  • Apple: Steve Jobs' health in focus again. (2009, January 14). Retrieved from istockanalyst.com
  • Caulfield, B. (2009, January 14). Lawsuits could fly over Jobs' exit. Retrieved from forbes.com
  • Elkind, P. (2008, March 17). The trouble with Steve. Fortune, 90.
  • Job-less: Steve Jobs' succession plan should be a top priority for Apple. (2009, January 7). Retrieved from knowledge.wharton.upenn.edu
  • Joni, S. (2009, February 2). Steve Jobs and your own privacy as an executive. Retrieved from forbes.com
  • Morris, B. (2008, March 17). What makes Apple golden. Fortune, 72.
  • Report: Jobs' health could lead to investor lawsuits. (2009, January 14). Retrieved from macnn.com
  • Radcliffe, D. (2009, January 17). Are a CEO's health problems a private matter? Retrieved from blogs.reuters.com