Thursday, January 15, 2009
In the prolonged media coverage of Steve Jobs’s health and its impact on Apple, business reporters from across the nation seek insight from corporate governance and ethics expert Jim Post, the John F. Smith, Jr. Professor in Management at Boston University.
For the January 15, 2009, Los Angeles Times article “Apple CEO Steve Jobs takes medical leave,” Dawn C. Chmielewski and Jessica Guynn report:
The decision by Apple Inc. boss Steve Jobs to take a medical leave after learning that his health issues were "more complex" than originally thought renews questions about the succession plan of a company whose fate has been closely linked to its charismatic leader.
On Wednesday, only a week after assuring investors that he felt fit to lead the Silicon Valley giant, Jobs wrote in an e-mail to employees that he would pass day-to-day management duties to Tim Cook, Apple's chief operating officer, until the end of June...."Steve Jobs is simply not going to be the force in the company that he has been in the past," said Boston University management professor James Post. "What we are really seeing is another step taken toward the next generation of leadership at Apple."
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Also on January 15, 2009, Bloomberg journalists Connie Guglielmo, Rochelle Garner, and Jason Gale write in the piece “Steve Jobs May Have Pancreas Removed After Cancer,”
The pressure now is on Apple’s board to provide more information on the events leading up to Jobs’s decision to take leave, said James Post, a professor of management at Boston University.
“Has Steve Jobs and Apple’s board played fair with investors? There are a lot of unhappy and dissatisfied investors who are going to say the answer is no,” Post said. “The board members may not really answer the question of what did they know and when did they know it until there’s a discovery process in a lawsuit.”
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On August 26, 2008, the New York Times, on its Freakonomics business blog, posts the article “What Does a Sick C.E.O. Do to His Company?” Annika Mengisen, reporting:
When Steve Jobs was diagnosed with pancreatic cancer in 2003, Apple waited until after his surgery to tell the public and shareholders — yet company stock only fell 2.4 percent on the next trading day.
But Jobs’s gaunt appearance while speaking at the Worldwide Developers Conference in June and the speculation about his health that followed likely contributed to a drop in Apple’s stock shortly after his appearance…. We asked Steve London, the partner in charge at the Boston office of Pepper Hamilton LLP and head of the firm’s Shareholder Activism Team, and James Post, a professor at the Boston University School of Management, how a sick C.E.O. can affect his company.
Q: How do you predict Apple’s stock price and overall image would be affected if Steve Jobs ever announced that he had another bout of cancer?
Post: The stock would definitely take a serious hit. Jobs is, in many respects, Apple’s greatest asset. Institutions may have already been pricing such bad news into the stock, but many small investors who worship Apple would likely be caught….
Q: Which is worse for a company whose C.E.O. is diagnosed with cancer: saying nothing for months while shareholders and the public speculate, or announcing it outright?
Post: For most C.E.O.’s, getting to the top is a lifetime of effort. They don’t want to surrender the power and position and may be given to overestimating their ability to conquer their illnesses. I think it has less to do with hubris than with an egotistical determination to prevail.
This refusal to surrender can be a virtue in many business contexts, but it can also be a weakness when dealing with serious health issues.
Once the diagnosis is made, it is important for a company C.E.O. or board chair to make public the announcement, the therapeutic strategy, and the outlook. Secrecy and “no comment” are the worst courses of action.
Secrecy has two effects: First, it can deceive investors, customers, employees, and business partners. This is unethical, per se, and has negative effects on the company’s reputation for integrity. Second, it encourages speculation that may be worse than the actual facts of the situation. This can lead to business losses….
Q: Do you think C.E.O.’s overestimate the impact their health has on their companies?
Post: Many do overestimate their importance. But many more, I suspect, 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 board uses its collective judgment to assess impact. Can the C.E.O. perform those duties that are essential to the position (such as judgment, analysis of information, travel, and appearance at leadership events)?
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Previously, on July 22, 2008, Reuters columnist Martha Graybow, for her piece “U.S. boards face tough CEO health questions,” wrote,
Investor concern about the health of Apple Inc chief Steve Jobs is spurring questions about how far companies must go in telling shareholders about a top executive's medical condition....The company was asked about Jobs' health in a conference call with analysts on Monday following quarterly results, though it did not provide much new information. Chief Financial Officer Peter Oppenheimer said Jobs served as CEO "at the pleasure of Apple's board and has no plans to leave Apple" though his health is "a private matter."
That is not likely to satisfy Apple watchers who are concerned about Jobs, said James Post, a professor at Boston University School of Management.
"That comment is guaranteed to sort of stimulate a lot of discussion and more speculation," he said.
He said there are no firm rules for boards when a CEO has a medical condition, but as a best practice, the more serious the matter, the sooner the company should step forward.
"The Apple board really feels two very distinct kinds of pressure in this case," he said. "The uniqueness of Steve Jobs, just who he is and his relationship to the company creates a special burden, and the kind of rumors that are circulating also create a burden."
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Related news story: MSN Money asks Jim Post about Apple, Dell, and replacing the “rock-star CEO”
