Apple
What happens to Jobs matters to Apples investors, largely because he has become the public face of the company he started in 1976 – and because hes widely seen as the creative force behind the companys products. Apples stock has fluctuated along with Jobs health since 2004, when investors first learned that he had cancer.
So do investors across corporate America have the right to know this sort of information as they struggle to manage their recession-hit portfolios? What are the rules under U.S. securities laws?
Here are some questions and answers about disclosure requirements.
Q: Why did news about Jobs liver transplant come from The Wall Street Journal and not from Apple?
A: Companies dont have to give updates on their executives health. That is typically not considered “material information,” which must be disclosed under rules put forth by the Securities and Exchange Commission.
“Nothing is required to be disclosed unless the health issue affects his ability to steward the company appropriately,” said Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware.
Jobs also has been on medical leave since January, which means he technically isnt working for the company in an executive capacity.
Q: What is meant by “material information”?
A: The SEC requires companies to disclose information that would affect a reasonable investors decision to buy or sell a stock. That includes information regarding earnings, mergers and acquisitions, new products and contracts, changes in auditors, bankruptcies and events relating to investments in a company, like dividends and stock repurchase plans.
Companies also must disclose certain information relating specifically to their top executives, including stock ownership, securities transactions, compensation and personal and professional biographical data.
When a CEO retires, dies or has his duties removed, a company must also inform the public. That is why Apple disclosed in January that Jobs was going on medical leave and chief operating officer Tim Cook would assume oversight of the day-to-day operations at the company.
Q: But Jobs is an iconic figure and Apples fortunes seem to rise and fall with his health. Shouldnt that require greater disclosure?
She said the SEC rules lack specific guidelines regarding executive health disclosures, which means corporate directors have discretion over what kind of information they decide to tell the public.
“Its a fuzzy, gray area of what is required,” Perryman said. “There is certainly interest among investors, but that doesnt mean they have a right to know.”
However, even though Apple isnt required to disclose information about Jobs health, it might make sense for the company to do so – even if that can rattle the stock.
When Jobs announced in January that he was taking a leave of absence through June because his medical problems were more complex than he initially thought, Apple shares sank 7 percent. Apples stock fell more than 1 percent on Monday to around $138 a share in the first day of trading since the transplant news came out on Saturday.
“From a legal standpoint, Apple doesnt have to disclose a thing. But from a transparency standpoint, they should disclose,” said Elson, from the University of Delaware. He says that even though Jobs health may be his personal business, Jobs represents so much of the Apple brand that investors deserve to be updated on the status of his health.