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CEOs walk fine line when sharing sickness with investors

By Jena McGregor
Washington Post

JPMorgan Chase chief executive Jamie Dimon had some news for shareholders and employees this week: He has been diagnosed with throat cancer.

In the announcement Tuesday, Dimon said the prognosis from his doctors is excellent, that his condition is curable and that there is no evidence the cancer has spread. He said he would begin an eight-week radiation and chemotherapy regimen shortly; though he would curtail his travel plans, he would continue running the company. Dimon then said the “company will move forward together with confidence” as a result of its other “outstanding leaders.”

The announcement appeared to strike a balance between investors’ need for disclosure and Dimon’s right to maintain some level of privacy about his health. It offered some specifics about the chief executive’s condition, shared the news quickly before any rumors or speculation began, and referenced the company’s bench of other leaders.

“These folks came out quickly and effectively,” says Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. “They did exactly what they were supposed to do.”

Disclosures about the chief executive’s health conditions aren’t always commended that way.

• When Steve Jobs went on medical leave from Apple in early 2011, many criticized the company for not being more open about the specifics of his health problem. And it wasn’t the first time that vague language about his condition left shareholders on edge. Jobs had surgery for pancreatic cancer in 2004 and took a six-month leave of absence in 2009 for “health-related issues,” following an opaque letter in which he described his recent weight loss as being a “hormone imbalance” and a “nutritional problem.” Over a two-week period, the stock fell 17 percent.

• Some analysts and governance experts raised concerns when Google’s Larry Page missed the company’s 2012 shareholder meeting because he had lost his voice, giving little detail about his ailment. He reassured employees there was nothing seriously wrong with him, and investors seemed unfazed. Last year, he ended the speculation by announcing he was diagnosed with vocal cord paralysis, a rare condition that he said was not affecting his work.

• Back in May 2010, Sara Lee Corp.’s board offered little detail when it said that then-chief executive Brenda Barnes was taking a leave of absence, prompting one news outlet to call it an “information blackout.” A month later, the company issued a press release that Barnes had suffered a stroke and was recuperating. By August, the company – which has since split into two – announced Barnes’ resignation.

The U.S. Securities and Exchange Commission does not provide a specific guideline on what boards should disclose about a chief executive’s illness, other than to say companies should share anything that is “material,” or that a reasonable investor would want to know in order to make a decision.

John Coffee, a professor at Columbia Law School who specializes in corporate governance and securities law, said it is often the chief executives themselves who don’t want to share the news, rather than their companies.

At JPMorgan, succession planning has been a source of inquiry even before Dimon’s illness. Reports said at least 10 senior executives have departed in the last two years, including Mike Cavanagh, who was seen as a potential heir to Dimon’s job but left in March to join the Carlyle Group. Dimon, who is 58, was not expected to pass the baton anytime soon – especially after weathering recent controversies at the firm that included regulatory probes into the bank’s massive “London Whale” trading loss. According to a company spokesman, the board has succession plans that focus on immediate, three-year and five-to-seven-year time frames.

Dimon is far from the only chief executive who has decided to be forthcoming about his health situation. David Larcker, director of the Corporate Governance Research program at Stanford’s Graduate School of Business, recalls one chief executive who brought his oncologist to the company’s shareholder meeting to speak with investors. “He talked in precise detail about what was happening,” Larcker says. “That was over the top.”

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