Closer Look Series: Topics, Issues and Controversies in Corporate Governance, No. CGRP-12, By David F. Larcker, James Irvin Miller Professor of Accounting, Director of Stanford Graduate School of Business Corporate Governance Research Program And Brian Tayan, Stanford GSB casewriter and MBA ’03 Date: 01-24-2011
In recent years, much attention has been paid to CEO succession planning as a risk management issue. However, it is not clear what information the company should disclose on this matter or how extensive the disclosure should be. This is particularly true when it comes to companies whose CEOs are experiencing health issues.
On the one hand, shareholders value detailed disclosure on the health of the CEO because it helps them to make a reasoned assessment of whether and when a transition might occur. On the other hand, health information is a private matter, which the CEO may not wish to disclose.
We examine this issue as it has unfolded at Apple.
- How extensive should disclosure on CEO health be?
- How should the board weigh its obligations to shareholders against the protection of privacy?
- Should the board disclose other, less sensitive information regarding CEO behavior that might be material to the market price of the stock price (such as a distracting divorce, excessive stress levels, or risky hobbies)?
Read the attached Closer Look, and let us know!