Do CEOs Deserve Privacy? Warren Buffett Answers the Question Correctly

The Oracle of Omaha understands that, for chief executives, personal issues are public concerns

Reuters

A tough test for CEOs and companies is when to disclose adverse health events.

CEOs of major companies are public figures, and significant changes in their health status are "material" events requiring disclosure under the securities laws, because the information would influence an investors decision to buy or sell the stock.

Steve Jobs continually flunked this test, failing for years to disclose in a timely way key events in his struggle with pancreatic cancer.

Yesterday, Warren Buffett passed the test with a short letter to shareholders that included answers to the relevant questions:

What was the diagnosis (prostate cancer)?
When and now did he learn about illness (less than a week ago as part of regular exam --caught early)?
Has the cancer spread (no)?
What is the treatment (radiation, starting in July)?
Any restrictions on ability to do job (no, other than short-term travel limits)?
What is prognosis (condition not life-threatening at present)?
When will Buffett give updates ("I will let shareholders know immediately should my health situation change. Eventually, of course, it will; but I believe that day is a long way off")?

Buffett's disclosure is a model because he addresses the core issues. Of course, unlike Jobs, his news was basically good -- the prostate cancer was caught early, treatment is routine, and the prognosis is good. But I, at least, have little doubt that had the illness been more dire, Buffett would have disclosed it in exactly the same manner.

He knows that the information is material to shareholders. And, any privacy rights are overridden by his importance to the company.

The practices on CEO health disclosures are inconsistent, although the trend, Jobs to the contrary, has been to disclose.

Nonetheless, despite many requests that the SEC clarify what disclosure is required in this area, it has chosen not to do so. It should, with some minimum standards for all publicly held companies.When a CEO or other vital leader has a significant illness or disability, it is a very significant corporate event.

In any event, companies are free to develop their own approaches to such disclosure. All companies should anticipate such an event.

And all should be prepared to address the sequence of questions Buffett answered in his short shareholder letter.

Ben W. Heineman Jr.

Ben Heineman Jr. has held top positions in government, law, and business. He is the author of High Performance with High Integrity. More

Ben W. Heineman, Jr. was GE's Senior Vice President/General Consultant from 1987-2003, and then Senior Vice President for Law and Public Affairs in 2004 and 2005. He is currently a Senior Fellow at two Harvard schools: the Belfer Center for Science and International Affairs at Harvard's Kennedy School of Government and Harvard Law School's Program on Corporate Governance. He is also a Distinguished Senior Fellow at Harvard Law School's Program on the Legal Profession and Senior Counsel to the law firm of Wilmer Hale. A former Rhodes Scholar, editor-in-chief of the Yale Law Journal, and law clerk to Supreme Court Justice Potter Stewart, Mr. Heineman practiced constitutional law prior to his service at GE. His book High Performance with High Integrity was published in June 2008. In 2007, he served on the Independent Review Panel on the World Bank Group's Department of Institutional Integrity and is currently on an international panel advising the President of the World Bank on governance and anti-corruption. He is a recipient of the American Lawyer's Lifetime Achievement Award and the Lifetime Achievement Award of Board Member Magazine. Ethisphere Magazine named him one of the 100 most influential individuals on business ethics in 2008.