Must Apple talk of CEO's health?
Question, anwers for investors about what the computer-maker is required to disclose.
NEW YORK - Apple Inc. hasn't been shy about touting the sales of its new mobile device. But it didn't say anything confirming weekend reports that cofounder and chief executive officer Steve Jobs had a liver transplant two months ago.
What happens to Jobs matters to Apple's investors. He has become the public face of the company he started in 1976 - and he's widely seen as the creative force behind the company's products.
So do investors have the right to know this sort of information? Here are 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 don't have to give updates on executives' health. That is typically not considered "material information," which must be disclosed under Securities and Exchange Commission rules.
"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.
Q: What is meant by "material information"?
A: The SEC requires companies to disclose information that would affect a reasonable investor's decision to buy or sell a stock. That includes information on earnings, mergers and acquisitions, new products and contracts, changes in auditors, bankruptcies, and events relating to investments in a company, like dividends.
Companies also must disclose information about their top executives such as 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 said in January that Jobs was going on medical leave.
Q: But Jobs is an iconic figure, and Apple's fortunes seem to rise and fall with his health. Shouldn't that require greater disclosure?
A: If information isn't deemed "material," then the decision lies with Apple's board, said Alexa A. Perryman, a professor of management at the Neeley School of Business at Texas Christian University.
She said the SEC rules lacked specific guidelines for executive health disclosures, which means corporate directors have discretion over what they disclose.
However, even though Apple isn't required to disclose information about Jobs' health, it might make sense for it to do so, even if that can rattle the stock.
"From a legal standpoint, Apple doesn't have to disclose a thing," said Elson, of the University of Delaware. "But from a transparency standpoint, they should disclose."
Q: Will Apple ever have to disclose the liver transplant?
A: No. This can be deemed a private situation and can be kept confidential," said G. William Speer, senior counsel at the Atlanta law firm Bryan Cave. "The information only has to be known by the board and the company."