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NEW YORK – Steve Jobs is the public face of Apple, but that doesn't mean investors get to know every last detail about the CEO's health.
Jobs announced this week he is taking his third medical leave from the company he started in 1976.
No date was given for when he will return. No information was provided about what was wrong. No interim CEO was named, though Chief Operating Officer Tim Cook will be responsible for Apple Inc.'s day-to-day operations.
Apple didn't have to say more, according to legal experts, even though what happens to Jobs, 55, matters to its shareholders because he's considered the creative force behind the company.
Apple is in the spotlight now for its secrecy on Jobs' health. But a handful of other companies including American International Group, Sara Lee and McDonald's have dealt with similar issues in recent years — each in its own way. AIG, for instance, announced a succession plan even though it hasn't had to use it.
Here are some questions and answers about disclosure requirements:
Q: What are companies required to tell about an executive's health?
A: The short answer is nothing, unless the illness hampers the executive's ability to work. Then it would be considered "material information," which must be disclosed under the Securities and Exchange Commission's rules.
Even then, companies don't have to explain what is wrong. All Apple said was that Jobs was taking medical leave to focus on his health, he would remain CEO and he would be involved in the major strategic decisions for the company. No other specifics were given.
"He is a very revered leader, and I think the public wants to know as much as possible," says Karen Brenner, a professor at New York University's Leonard N. Stern School of Business. "But other than understanding how his availability is going to be altered, there is not much more he needs to disclose at this time."
Q: What is meant by "material information"?
A: The SEC requires companies to disclose information that would affect an investor's decision to buy or sell a stock. That includes information regarding corporate earnings, mergers and acquisitions, new products and contracts, changes in auditors, bankruptcies and events relating to investments in a company, including dividends and stock-repurchase plans. Companies must also disclose information relating to their top executives, including compensation, stock ownership, securities transactions and biographical data.
Beyond that, companies must disclose to the public when a CEO retires, dies or leaves a company. That is why Apple had to acknowledge that Jobs was taking a medical leave of absence.
Q: Do the SEC rules lay out exactly what circumstances need to be disclosed regarding an executive's health?
A: Not at all. "The rules are confusing and not straightforward," says Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware. "There is a lot of room for interpretation of what needs to be disclosed."
Jeffrey Sonnenfeld, a professor at the Yale School of Management, says Apple kept its latest disclosure tight and to the point, unlike two years ago when it waivered on Jobs' health.
After months of playing down concerns over his health, Jobs said in January 2009 that his severe weight loss was a result of a treatable hormone imbalance. Nine days later, he announced he was going on a leave of absence for six months. Then in June of that year, The Wall Street Journal, not Apple, revealed he had a liver transplant two months earlier.
"They've taken the approach this year that they aren't going to say anything beyond the minimum that meets their legal compliance," Sonnenfeld says.
Q: Who gets to decide if corporate disclosures are good enough?
A: It is up to the SEC to monitor whether companies make proper disclosures.
Q: Isn't Jobs' health something Apple's investors accept when they buy the stock?
A: Not necessarily, Elson says. Investors who bought the stock since the cancer was first disclosed in 2004 had to consider his health. But Elson points out that Apple may have investors who bought the stock long before that.
Elson also says that the reason for disclosure rules is to make sure material information is "fully and fairly" disseminated. "We don't want there to be exceptions to the rules for individual companies," Elson says. "The American (regulatory) system requires disclosure on the part of everyone."
Jobs announced this week he is taking his third medical leave from the company he started in 1976.
No date was given for when he will return. No information was provided about what was wrong. No interim CEO was named, though Chief Operating Officer Tim Cook will be responsible for Apple Inc.'s day-to-day operations.
Apple didn't have to say more, according to legal experts, even though what happens to Jobs, 55, matters to its shareholders because he's considered the creative force behind the company.
Apple is in the spotlight now for its secrecy on Jobs' health. But a handful of other companies including American International Group, Sara Lee and McDonald's have dealt with similar issues in recent years — each in its own way. AIG, for instance, announced a succession plan even though it hasn't had to use it.
Here are some questions and answers about disclosure requirements:
Q: What are companies required to tell about an executive's health?
A: The short answer is nothing, unless the illness hampers the executive's ability to work. Then it would be considered "material information," which must be disclosed under the Securities and Exchange Commission's rules.
Even then, companies don't have to explain what is wrong. All Apple said was that Jobs was taking medical leave to focus on his health, he would remain CEO and he would be involved in the major strategic decisions for the company. No other specifics were given.
"He is a very revered leader, and I think the public wants to know as much as possible," says Karen Brenner, a professor at New York University's Leonard N. Stern School of Business. "But other than understanding how his availability is going to be altered, there is not much more he needs to disclose at this time."
Q: What is meant by "material information"?
A: The SEC requires companies to disclose information that would affect an investor's decision to buy or sell a stock. That includes information regarding corporate earnings, mergers and acquisitions, new products and contracts, changes in auditors, bankruptcies and events relating to investments in a company, including dividends and stock-repurchase plans. Companies must also disclose information relating to their top executives, including compensation, stock ownership, securities transactions and biographical data.
Beyond that, companies must disclose to the public when a CEO retires, dies or leaves a company. That is why Apple had to acknowledge that Jobs was taking a medical leave of absence.
Q: Do the SEC rules lay out exactly what circumstances need to be disclosed regarding an executive's health?
A: Not at all. "The rules are confusing and not straightforward," says Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware. "There is a lot of room for interpretation of what needs to be disclosed."
Jeffrey Sonnenfeld, a professor at the Yale School of Management, says Apple kept its latest disclosure tight and to the point, unlike two years ago when it waivered on Jobs' health.
After months of playing down concerns over his health, Jobs said in January 2009 that his severe weight loss was a result of a treatable hormone imbalance. Nine days later, he announced he was going on a leave of absence for six months. Then in June of that year, The Wall Street Journal, not Apple, revealed he had a liver transplant two months earlier.
"They've taken the approach this year that they aren't going to say anything beyond the minimum that meets their legal compliance," Sonnenfeld says.
Q: Who gets to decide if corporate disclosures are good enough?
A: It is up to the SEC to monitor whether companies make proper disclosures.
Q: Isn't Jobs' health something Apple's investors accept when they buy the stock?
A: Not necessarily, Elson says. Investors who bought the stock since the cancer was first disclosed in 2004 had to consider his health. But Elson points out that Apple may have investors who bought the stock long before that.
Elson also says that the reason for disclosure rules is to make sure material information is "fully and fairly" disseminated. "We don't want there to be exceptions to the rules for individual companies," Elson says. "The American (regulatory) system requires disclosure on the part of everyone."
