Sunday, January 25, 2009
When the Corporate Luminary Becomes Seriously Ill: When Is a Corporation Obligated to Disclose that Illness and Should the Securities and Exchange Commission Adopt a Rule Requiring Disclosure?, by Allan Horwich, Schiff Hardin LLP; Northwestern University - School of Law, was recently posted on SSRN. Here is the abstract:
Recent speculation and rumors about the health of senior corporate executives of public companies (most notably Steve Jobs of Apple Inc.) and the advanced age of many leaders in the corporate community prompt a consideration of when, if at all, there must be public disclosure of the ill health of a person whose involvement in a corporation is perceived as vital to the continued financial success or independence of that company. This Article addresses the application of various disclosure requirements under the Securities Exchange Act of 1934 to facts regarding the health of a corporate "luminary." An adverse development in the health of a luminary that has, or may have, an adverse material impact on the company may not trigger an immediate disclosure obligation. There are, however, numerous situations where ill health with an adverse material corporate impact may have to be disclosed. In order to avoid uncertainty in this area - since there are competing views on the application of Exchange Act disclosure principles to personal health-related facts - this Article proposes a rule for adoption by the Securities and Exchange Commission that would impose a disclosure requirement in narrow circumstances.