How Far Will a Company Go to Protect its CEO’s Personal Life?
One of the most intriguing pieces of business news last week was Apple CEO Steve Jobs’ return to public life, his first public appearance since October. After a six-month break and swirling rumors of health problems, Jobs apparently returned to work two months ago, but the health concerns and Jobs’ suddenly-gaunt appearance last year made analysts nervous enough that Apple stock prices dropped. So how far will a company go with their CEO’s public perception to save the bottom line?
Apple already knows how important Steve Jobs’ health is to its stock prices. In 2003, Jobs was diagnosed with pancreatric cancer, but the company kept the diagnosis secret, citing Jobs’ privacy over the welfare of Apple’s stockholders. The company only unveiled the information a year later once the cancer had been treated, still causing the company’s shares to drop 2.4%. Despite the release of a new iPhone last year, Jobs’ new health scare sent company stock dropping 5%.
There isn’t a major precedent to the Jobs example, primarily because Jobs is one of the most high-profile CEOs of the past century. But there are examples of companies doing their best to protect their CEOs personal information in an effort to stabilize stock prices. And now that the high-priced CEO is something of a pariah, companies are learning more about how these things can affect their shareholders. In 2006, the sudden extreme weight loss of Lazard CEO Bruce Wasserstein started a number of health rumors, all of which the company denied. While rumors swirled about everything from a heart condition to a 75-pound weight loss, Lazard refused to comment and kept Wasserstein from talking to the press, continuously reassuring stockholders that their CEO was fine. The story eventually went away and Wasserstein is still at Lazard, but the way this story evolved was perhaps a foretelling of what is happening with Jobs.
It’s not just a CEO’s health that can hurt a company’s stock price. A 2007 study from professors at Arizona State and New York University found that the bigger a CEO’s home, the poorer their company’s stock fared. According to the study, which analyzed 488 CEOs’ principal residences, a mega-mansion gave the impression that chief executives considered their personal well-being more important than their company’s. While we’re probably a ways off from some bizarre Weekend at Bernie’s melodrama, it’s certainly fascinating to think about the lengths a company might go to keep information about its CEO secret.
