Exploring Corporate Governance Around the World

By Allison Garrett, Senior Vice President for Academic Affairs at Oklahoma Christian University





Friday, July 14, 2006

Ben Roethlisberger & CEO Health Problems

CNBC Reporter, Melissa Lee, asks the question, "When a CEO is sick -- who has the right to know about it?" The article, available here, looks at several recent deaths of CEOs.

One of the most important duties of a board of directors is succession planning. As part of the fulfillment of that duty, the board should know about senior officers' health issues. Not only that, if I were a board member, I would want to know if senior officers engage in any high-risk sports. Why should the corporation be any different than, say, a professional sports team? With Ben Roethlisberger's recent injury from riding his motorcycle without a helment, we have seen how damaging to an organization this type of risky behavior can be.

While a long life isn't assured for any of us, if an executive has serious health problems or participates in risky behavior, the board of directors should be aware of this.

Should the shareholders also be made aware of health problems or risky behavior through corporate disclosures? The SEC's disclosure rules do not currently address the issue of health of the executive officers of a company. Nell Minow is quoted in Lee's article as saying that executives give up the right to privacy regarding their health issues. This is similar to the public reporting that occurs when the President has his annual physical.

And, as I've suggested above, risky behavior should fall into the same category. Just imagine the disclosures about these issues: John Doe, the 44 year old CEO of the company, has a cholesterol level of 255. He is 40 lbs above the recommended weight for his height and he has Type-2 diabetes. He also has a strong family history of heart disease. Oh, and did we mention that he BASE jumps, flies ultra-lights and rides a motorcycle without a helmet as hobbies?

While disclosure might be a good idea in certain situations where an officer's long-term prospects of survival are limited, companies would have tremendous difficulty deciding what should and should not be disclosed regarding other types of health concerns or risky behavior. If regulators such as the SEC were to craft regulations to address these issues, what approach should be taken? Maybe the regulations could require disclosure when, for example, the officer has been unable to perform his or her job on a full-time basis for at least 4 of the past 12 weeks or something of that nature.

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