Investors Want Right to Know
Wall Street Journal, January 24, 2011
Apple’s limited disclosure about its ailing chief executive is stirring debate about whether corporate boards should be forced to tell investors more about ill leaders and CEO succession plans. There’s a growing clamor for greater federal oversight of such disclosures. Mr. Job’s recent announcement might also widen support for shareholder resolutions pushing boards to divulge detailed succession planning policies.
The Jobs announcement said nothing about the health issue prompting his time off or when he might return. Apple directors never explained his nearly six month previous leave, begun before his liver transplant. Many boards have trouble deciding how much to tell shareholders about a CEO’s sudden disabling illness because many leaders prefer privacy. Securities laws require publicly held companies to disclose material information that could affect an investment decision as to acquire or sell shares. Directors decide what’s material.
Company’s typically don’t reveal a CEO’s health problems until the condition reaches a critical stage. “Unless there are SEC standards for disclosures about CEO health, the recalcitrant boards won’t discuss what the diagnosis or illness is, ” contends Ben Heineman, a former general counsel at General Electric. Mr. Heineman, who now teaches corporate governance and business ethics at Harvard, favors a federal rule covering any medical absence or impairment that seriously affects a business.
Harvey Pitt, a former SEC chairman, said the agency debated the idea during his tenure but “The commission resisted the temptation to lay down hard and fast rules.” CEO health is not just an issue for Apple. Several other businesses, including Sara Lee and AIG have also recently grappled with this issue. In May Sara Lee said CEO Brenda Barnes was taking a temporary medical leave without providing details about its likely duration or underlying cause. About a month later, Sara Lee announced Barnes had suffered a stroke and soon stepped down.
AIG CEO Robert Benmosche was diagnosed with cancer in October. He hasn’t divulged what type, because he doesn’t want to invite uninformed speculation about his condition.
Comment: Company boards have to make decisions on what and when conditions warrant public disclosure. CEO health is one of the many conditions they must consider. Who determines when a medical impairment reaches the point to affect a business? If a mature company does not have competent executives able to carry on the business without the CEO, investment in that company is probably a poor risk and should be avoided. A person’s privacy is a delicate situation. The SEC could publish CEO health standards for guidance, but the ultimate responsibility to make a decision as to when public disclosure is appropriate should be left to the board.
In Health Law, Rx for Trouble
The Wall Street Journal, March 9, 2011
Sandy Chung is grappling with a new kind of request at her pediatrics office in Fairfax, VA. — prescriptions for aspirin and diaper-rash cream.
Patients are demanding doctor’s orders for over-the-counter products because of a provision in the health-care overhaul that slipped past nearly everyone’s radar. It says people who want a tax break to buy such items with what’s known as flexible-spending accounts need to get a prescription from a doctor. The result is that Americans are visiting their doctors before making a trip to the drugstore, hoping their physician will help them out by writing the prescription.
The new requirements create both an added burden for doctors and new complications for retailers and pharmacies. “It drives up the cost of health care as opposed to reducing it,” says Dr. Chung, who rejected much of a 10-item request from a mother of four that included pain relievers and children’s cold medicine. Though the new rules on over-the-counter drugs amount to a small part of the massive overhaul of the health-care system, the unintended side effects show how difficult it can be to predict how such game-changing legislation will play out in the real world.
Some doctors, irked by the paperwork and worried about lawsuits, are balking at writing the new prescriptions. Pharmacists and retailers say the changes mean they have to apply a personalized label on some 15,000 different everyday products for customers paying with certain debit cards.
About 33 million Americans are in families that have flexible-spending accounts, which are funded through payroll deductions and allow customers to pay for health expenses with tax-free dollars.
Comment: I find it disappointing that the article never once mentions that charging the cost of over-the-counter products to a flexible-spending account is illegal. The provisions of the new health care law are clear and not the problem. The problem is people trying to cheat the system. Doctors should follow Dr. Chung’s example by doing what is right and not writing prescriptions for over-the-counter medicine.
By Roger Eigsti
Board President,
Institute for Business, Technology, and Ethics