Steve Jobs’ health came under scrutiny recently after the Apple chief executive’s gaunt appearance at the company’s developer conference revived memories among observers of his battle with pancreatic cancer in 2004. An analyst subsequently inquired after the CEO’s well-being on a conference call. The company has said that its founder is merely suffering from a common bug. To what extent should any chief executive feel obliged to divulge health details to investors? Is it simply a private matter? And what is the best response when such questions are raised?

THE ACADEMIC
Frank Partnoy
The controversy about Mr Jobs illustrates a gruesome reality: a company’s share price includes the value of an insurance policy on the CEO’s life. If Mr Jobs died unexpectedly, Apple’s share price would plummet. Even worries about his cancer cause a price decline because of the increased chance of his untimely demise. For most companies the opposite is true. Academic research shows that most shareholders make money when the CEO dies unexpectedly. The share price goes up because shareholders believe a new CEO will add value, or in some cases because they are unlikely to bilk the company as much. The classic example is Armand Hammer, the head of Occidental Petroleum, whose share price rose by half a billion dollars the day he died. The rule for CEO health disclosures should be the same as that for any inside information: disclose material facts you know or abstain from trading in the company’s shares. The disclosure obligation should be high for CEOs who are very good, such as Mr Jobs. But it should be even higher for CEOs who are very bad. Ironically, average CEOs have a better claim to privacy, because fewer people care about their health.
The writer is a professor at the University of San Diego School of Law