updated 1/19/2011 5:21:28 PM ET 2011-01-19T22:21:28

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."

Even though Apple doesn't have to disclose more, shareholders might respond positively to an increase in transparency.

"It can be in your best interest to disclose more, because then it gives shareholders less opportunity to guess," says Frank Butler, a professor of management at the University of Tennessee at Chattanooga and co-author of the recent academic paper, "When the CEO is Ill, Keeping Quiet or Going Public."

Q: How have investors reacted to Apple's news — and lack of it?

A: The company's stock has fluctuated along with Jobs' health since 2004, when he first disclosed he had cancer, but the latest announcement didn't have as big an effect as some analysts had predicted.

On Tuesday, Apple's shares slid $7.83 a share, or about 2.3 percent, to $340.65 in the first day of trading on news of Jobs' leave of absence. It made some of that back Wednesday after Apple reported strong quarterly results late Tuesday.

The decline was sharper — nearly 12 percent — between Jan. 5, 2009, the day Jobs said his weight loss was due to a hormone imbalance, and Jan. 15, the day after he said he will go on medical leave for health problems that were more complex than he thought. The stock's value has quadrupled since, and Apple's market capitalization is now second only to Exxon Mobil Corp. among public U.S. companies.

Q: Are other companies currently dealing with the disclosure of health issues differently?

A: Alexa Perryman, a professor of management at the Neely School of Business at Texas Christian University, points to AIG. The insurance giant, which is owned largely by the U.S. government, disclosed in October that CEO Robert Benmosche had cancer. The company did not say what kind of cancer but said he was undergoing chemotherapy. It also said he was continuing a normal schedule.

Two days after the announcement, the company said it was reviewing its succession plan in case his status changes. It said that the chairman of the board, Steve Miller, would become interim CEO until a long-term replacement was named if that action becomes necessary.

"AIG made a nice step forward with its disclosure," says Perryman, who co-authored the paper on CEO illness disclosures with Butler.

By contrast, Sara Lee Corp. took an approach more akin to Apple's. Last May, Sara Lee announced CEO Brenda Barnes was taking a temporary medical leave, but it didn't say for another month that she had a stroke. The leave became permanent in August.

McDonald's Corp. lost two consecutive CEOs within a year. The first, Jim Cantalupo, died suddenly in April 2004 from a heart attack, which the company disclosed. Three weeks later, the company disclosed that his successor, Charlie Bell, had cancer and underwent surgery. McDonald's said that Bell was unaware of the cancer when he was named CEO.

Over the next eight months, McDonald's made additional disclosures about Bell's health. Bell died in January 2005.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Explainer: Top CEOs and their exit strategies

  • Image: Howard Schultz
    Reuters file

    The news that Apple Chief Executive Steve Jobs is taking a leave of absence shook up investors and customers in large part because for many Apple loyalists, Steve Jobs is Apple Inc.

    Jobs isn’t the only CEO to be so closely associated with a brand that investors and customers fear the company will be nothing without them. Here’s a look at companies that have successfully prepared for the loss of a CEO, and those that haven’t.

  • Google/Eric Schmidt

    Image: Eric Schmidt

    “Day-to-day adult supervision no longer needed!” Eric Schmidt tweeted. It was his way of announcing that he was stepping down as chief executive of the search engine giant, and also showing that he was in on the joke about his role at the company.

    Schmidt, a longtime technology executive, was brought on board a decade earlier to help the company’s founders, Larry Page and Sergey Brin, grow their fledgling but very promising young company.

    Schmidt now clearly thinks the company doesn’t need that guidance anymore. In April, Page will take over as chief executive and Brin will focus on new products.

    “Larry, in my opinion, is ready to lead,” he said in a statement the company released Thursday.

  • Berkshire Hathaway/Warren Buffett

    Image: Warren Buffett

    The Oracle of Omaha, Warren Buffett, said in a 2007 letter to shareholders that he has long had three internal candidates to succeed him as chief executive of Berkshire Hathaway, and had identified four potential candidates for the investment side of his job.

    Last year, the company announced that it had hired Todd Anthony Combs, a young former hedge fund manager who may turn out to be the heir apparent on the investment side of the business. Buffett said in February of 2011 that four candidates are in the running to be CEO.

    Buffett, now 80, announced details of his succession plan in his typical folksy style, writing in the 2007 letter to shareholders: “I’ve reluctantly discarded the notion of my continuing to manage the portfolio after my death — abandoning my hope to give new meaning to the term ‘thinking outside the box.’”

  • Microsoft/Bill Gates

    Image: Bill Gates

    Bill Gates co-founded Microsoft Corp. in 1975 with his childhood friend Paul Allen. But it was the man who lived down the hall from Gates at Harvard, Steve Ballmer, who would be groomed to lead the company.

    Ballmer joined Microsoft in 1980 and took over as Chief Executive in 2000, amid a long-running antitrust investigation that at one point threatened to break up the company.

    Gates, who became Chief Software Architect in the change, gave investors plenty of warning of his next move. He announced in 2006 that he would be giving up his position in 2008 to focus most of his energy on his philanthropic work. Gates remains chairman of Microsoft’s board.

    Ballmer’s succession strategy is much less clear. Three senior executives, Bob Muglia, Robbie Bach and Ray Ozzie, have said they would leave the company in the past year.

    ( is a joint venture of  Microsoft and NBC Universal.)

  • GE/Jack Welch

    Image: Jack Welch
    Getty Images

    Jack Welch is perhaps best known for his management skills, so it should come as no surprise that Welch was grooming several potential successors before leaving his post as head of GE in 2001. Jeff Immelt was eventually handed the top job.

    Two other oft-mentioned contenders were Robert Nardelli, who had less glorious stints at Home Depot and Chrysler, and James McNerney, current chief executive of Boeing.

  • Starbucks/Howard Schultz

    Image: Starbucks CEO Howard Schultz holds up a new Via coffee product at the Starbucks corporate headquarters in Seattle, Washington

    Although Starbucks wasn’t founded by Schultz, it was Schultz who made the company — and arguably the latte — into what it is today.

    Schultz stepped down from as CEO in 2000 to become chief global strategist, only to return in 2008 after conceding that the company had lost its footing.

    Under his resumed leadership, Starbucks made major changes meant to bring back the original feel of the company. But he also was forced to lay off employees and close stores in response to the recession. Starbucks has recently moved to expand its brand with products such as Via instant coffee.

    Schultz recently told The Harvard Business Review that he didn’t think he handled succession planning well last time and is aware of his duty to do it right next time. Still, he said he has no plans to leave soon.

  • Boeing/Harry Stonecipher

    Image: Harry C. Stonecipher
    AFP/Getty Images

    When Harry Stonecipher was forced to abruptly resign in 2005 following an affair with a staffer, Boeing was left without a CEO for several months. The company eventually chose board member and 3M CEO Jim McNerney, who had earlier said he wasn’t interested in the job.

    Alan Mulally, head of commercial airplanes and considered a top contender for the position, later bolted to Ford, where as CEO he has orchestrated an historic turnaround.

    Stonecipher’s abrupt exit followed the resignation in 2003 of previous CEO, Phil Condit, over an ethics scandal.

  • BP/Tony Hayward

    Image: Tony Hayward

    As CEO of BP, it seemed Tony Hayward could do no wrong … until the Gulf oil spill. After a series of embarrassing blunders, Hayward was shown the door. He was replaced by Robert Dudley, a longtime Amoco executive who stood out for handling the oil spill with more tact than the gaffe-prone Hayward.

    Hayward had been given the top job in 2007 following safety issues that plagued the company under the leadership of the previous BP CEO, Lord John Browne.

  • Dell/Michael Dell

    Image: Michael Dell

    Michael Dell founded the company that bears his name in 1984, and handed the top job over to Kevin B. Rollins two decades later. In 2007, Dell replaced Rollins to resume the top job once again.

    Dell told investors at a conference last year that the company’s board should know what the succession plan is. But at age 45, he said he has every intention of running the company for years to come.

    That’s a far more serious answer than he gave in 2008, when he told journalists that his succession plan involved avoiding getting hit by a truck.

  • HP/Mark Hurd

    Image: Mark Hurd

    When Hewlett-Packard abruptly dropped Chief Executive Mark Hurd in August 2010 after a sexual-harassment probe revealed that he had violated company standards, it left the tech giant without a leader.

    Chief Financial Officer Cathie Lesjak was appointed temporary CEO. In November, former SAP CEO Leo Apotheker took over as president and chief executive.

    Hurd was seen as key to turning HP around after taking over for Carly Fiorina in 2005. He also survived a 2006 scandal in which the company’s then-board chair was accused of using extreme tactics to track down media leaks.

  • Oracle/Larry Ellison

    Image: Larry Ellison
    Getty Images

    After being ousted from HP, Mark Hurd landed as co-president at Oracle. That company is also closely associated with its CEO, Larry Ellison.

    The move prompted some to wonder if Hurd is being considered as a potential successor to Ellison, who has run the company since founding it in 1977.


Discussion comments


Most active discussions

  1. votes comments
  2. votes comments
  3. votes comments
  4. votes comments

Data: Latest rates in the US

Home equity rates View rates in your area
Home equity type Today +/- Chart
$30K HELOC FICO 3.79%
$30K home equity loan FICO 4.99%
$75K home equity loan FICO 4.69%
Credit card rates View more rates
Card type Today +/- Last Week
Low Interest Cards 13.83%
Cash Back Cards 17.80%
Rewards Cards 17.18%