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Steve Jobs Is Not Dying.
July 26, 2008
Talking Business
Apple’s Culture of Secrecy
By JOE NOCERA
“No one wants to die,” said Apple’s chief executive, Steven P. Jobs. “And yet death is the destination we all share. No one has ever escaped it.”
It was a little over three years ago that Mr. Jobs spoke those existential words, in a commencement address at Stanford. His thoughts about death came during a portion of his speech in which he publicly discussed — for the one and only time, so far as I can tell — his brush with pancreatic cancer.
He talked about how he had learned in 2004 that he had a tumor on his pancreas. How his doctors told him that he shouldn’t expect to live more than six months. How, after “living with that diagnosis all day,” he had a biopsy that showed that his was a rare form of pancreatic cancer, curable with surgery. “I had the surgery and I’m fine now,” Mr. Jobs told the Stanford graduates. He added, “Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose.”
It was an uplifting tale, and an inspiring message. It was also less than the whole truth. In fact, Mr. Jobs first discovered he had an islet cell neuroendocrine tumor — which is both rarer and less deadly than other forms of pancreatic cancer — in October 2003. This was a full nine months before he had the surgery to remove it. Why did he wait so long? Because, according to a Fortune magazine article published in May, Mr. Jobs was hoping to beat the cancer with a special diet.
The Apple directors who knew the gravity of the situation urged him to undergo surgery, according to the Fortune article. But it was only when Mr. Jobs realized that the tumor was growing that he finally agreed. And only after the surgery was successful did he inform employees that he had been sick, in an e-mail message in which he declared himself “cured.” That’s how Apple’s shareholders found out, too. The company has never spoken about his illness, citing his “privacy” concerns.
I bring this up because of what transpired on Monday afternoon, during Apple’s third-quarter conference call. In June, rumors began swirling that Steve Jobs was sick again. They had started during the company’s annual Worldwide Developers Conference, where Mr. Jobs looked unusually thin and haggard.
Although the Apple public relations machine quickly put out the word that Mr. Jobs had been struck by “a common bug,” few investors were buying it. Wall Street analysts were besieged with questions from clients, wanting to know about Mr. Jobs’s health. On Monday, The New York Post published an article citing “multiple sources” who, the paper said, had met with Mr. Jobs and were “troubled by his thin appearance.” So when the Apple conference call later that day opened for questions, a Lehman Brothers analyst named Ben Reitzes gently asked the $64,000 question.
“A New York newspaper today called into question some issues around Steve and his health,” he said. “Would you mind addressing the situation?”
“Steve loves Apple,” replied Peter Oppenheimer, the company’s chief financial officer. “He serves as the C.E.O. at the pleasure of Apple’s board and has no plans to leave Apple. Steve’s health is a private matter.”
That was it. No insistence that he was cancer-free. No attempt to explain his gaunt condition. No nothing. When I spoke to Steve Dowling in Apple’s public relations department on Thursday, I got the same response. “Steve’s health is a private matter,” Mr. Dowling said. Then, just for good measure, he said it again. “Steve’s health is a private matter.”
But is it really?
•
There are no hard and fast rules about how and when companies need to disclose information about the health of their chief executives. In 1995, when Andrew S. Grove, then the chief executive of Intel, received a diagnosis of prostate cancer, he informed the company’s board and management. Intel. But he never told the company’s shareholders. Mr. Grove says now that because the cancer never impaired his ability to do his job, there was no reason to inform shareholders. (The world found out about Mr. Grove’s illness only when he wrote about it the following year.)
On the other hand, when Charles H. Bell received a diagnosis of colorectal cancer shortly after he became the chief executive of McDonald’s in 2004, the company quickly released the news. Mr. Bell resigned from the company that November, and died two months later.
“The question surrounding any kind of corporate disclosure always is: Is it material?” said Larry S. Gondelman, a lawyer with Powers Pyles Sutter & Verville. “And there is no bright line test in determining materiality.” A spokesman for the Securities and Exchange Commission said that the law defined materiality as information that “the reasonable investor needs to know in order to make an informed decision about his investment.”
No company has ever been held to account by the S.E.C. for failing to disclose information about its chief executive’s health, and I’m not suggesting that the S.E.C. should go after Apple for keeping mum about Mr. Jobs’s health. Indeed, I found plenty of people who felt he had every right to keep the information to himself. “As long as he is healthy, he doesn’t have to disclose,” said Charles R. Wolf, an analyst at Needham & Company. Roger McNamee, the well-known technology investor at Elevation Partners, said, “Because Steve Jobs has been appearing in public regularly, investors are getting a valuable form of disclosure.”
But if ever there was a chief executive who ought to feel some responsibility to tell shareholders about his health, it is Steve Jobs. First of all, he is not like other chief executives — he is, instead, the single most indispensable chief executive on the planet. As Mr. Wolf nicely put it, “Apple is Steve Jobs and Steve Jobs is Apple.” He added, “I think the stock would drop 25 percent or more if he were to leave the company unexpectedly.” When investors whisper about Mr. Jobs’s health, it’s not just gossip they are indulging in — his health really matters to Apple’s future.
Secondly, Mr. Jobs has had cancer, for crying out loud — and in the public mind, a particularly insidious kind. Although several doctors I spoke to say that the kind of cancer he had, and the kind of operation he underwent, give him a better-than-even chance of living a long and happy life, there are no guarantees with cancer. We all know that. Which is all the more reason why, at a minimum, Apple should flatten the rumor that his cancer has recurred — even if it won’t go further than that. “Not being able to provide a statement effectively dismissing the question is really unsatisfactory to most investors,” said A. M. Sacconaghi Jr., who follows the company for Sanford C. Bernstein.
The final reason, to be blunt about it, is that Apple simply can’t be trusted to tell truth about its chief executive. Under Mr. Jobs, Apple has created a culture of secrecy that has served it well in many ways — the speculation over which products Apple will unveil at the annual MacWorld conference has been one of the company’s best marketing tools. But that same culture poisons its corporate governance. Apple tells analysts far less about its operations than most companies do. It turns low-level decisions into state secrets. Directors are often left out of the loop. And it dissembles with impunity.
As, indeed, it has in this latest episode. On Wednesday, John Markoff reported in The New York Times that Mr. Jobs had had a surgical procedure earlier this year, the details of which remain unclear. I hear that he has had ongoing digestive difficulties, which have contributed to his weight loss — possibly a side effect of the surgery. And in the weeks leading up to the conference, he came down with an infection, which had a lot to do with why he looked so gaunt. It wasn’t cancer, thank goodness. But was more than a “common bug.” By claiming Mr. Jobs had a bug, Apple wasn’t just going dark on its shareholders. It was deceiving them.
It would be horrible if Mr. Jobs had a recurrence of cancer. I hope it never happens. At 53, he is in the prime of his life, the father of a young family. And for the rest of us, it’s exhilarating watching him work his magic in the marketplace. Steve Jobs has created more value and driven more innovation than just about anybody in business. Who doesn’t want to see what he’ll come up with next?
He also, though, needs to treat his shareholders with at least a modicum of respect. And telling them whether or not he is sick would be a good place to start.
On Thursday afternoon, several hours after I’d gotten my final “Steve’s health is a private matter” — and much to my amazement — Mr. Jobs called me. “This is Steve Jobs,” he began. “You think I’m an arrogant [expletive] who thinks he’s above the law, and I think you’re a slime bucket who gets most of his facts wrong.” After that rather arresting opening, he went on to say that he would give me some details about his recent health problems, but only if I would agree to keep them off the record. I tried to argue him out of it, but he said he wouldn’t talk if I insisted on an on-the-record conversation. So I agreed.
Because the conversation was off the record, I cannot disclose what Mr. Jobs told me. Suffice it to say that I didn’t hear anything that contradicted the reporting that John Markoff and I did this week. While his health problems amounted to a good deal more than “a common bug,” they weren’t life-threatening and he doesn’t have a recurrence of cancer. After he hung up the phone, it occurred to me that I had just been handed, by Mr. Jobs himself, the very information he was refusing to share with the shareholders who have entrusted him with their money.
You would think he’d want them to know before me. But apparently not.
Talking Business
Apple’s Culture of Secrecy
By JOE NOCERA
“No one wants to die,” said Apple’s chief executive, Steven P. Jobs. “And yet death is the destination we all share. No one has ever escaped it.”
It was a little over three years ago that Mr. Jobs spoke those existential words, in a commencement address at Stanford. His thoughts about death came during a portion of his speech in which he publicly discussed — for the one and only time, so far as I can tell — his brush with pancreatic cancer.
He talked about how he had learned in 2004 that he had a tumor on his pancreas. How his doctors told him that he shouldn’t expect to live more than six months. How, after “living with that diagnosis all day,” he had a biopsy that showed that his was a rare form of pancreatic cancer, curable with surgery. “I had the surgery and I’m fine now,” Mr. Jobs told the Stanford graduates. He added, “Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose.”
It was an uplifting tale, and an inspiring message. It was also less than the whole truth. In fact, Mr. Jobs first discovered he had an islet cell neuroendocrine tumor — which is both rarer and less deadly than other forms of pancreatic cancer — in October 2003. This was a full nine months before he had the surgery to remove it. Why did he wait so long? Because, according to a Fortune magazine article published in May, Mr. Jobs was hoping to beat the cancer with a special diet.
The Apple directors who knew the gravity of the situation urged him to undergo surgery, according to the Fortune article. But it was only when Mr. Jobs realized that the tumor was growing that he finally agreed. And only after the surgery was successful did he inform employees that he had been sick, in an e-mail message in which he declared himself “cured.” That’s how Apple’s shareholders found out, too. The company has never spoken about his illness, citing his “privacy” concerns.
I bring this up because of what transpired on Monday afternoon, during Apple’s third-quarter conference call. In June, rumors began swirling that Steve Jobs was sick again. They had started during the company’s annual Worldwide Developers Conference, where Mr. Jobs looked unusually thin and haggard.
Although the Apple public relations machine quickly put out the word that Mr. Jobs had been struck by “a common bug,” few investors were buying it. Wall Street analysts were besieged with questions from clients, wanting to know about Mr. Jobs’s health. On Monday, The New York Post published an article citing “multiple sources” who, the paper said, had met with Mr. Jobs and were “troubled by his thin appearance.” So when the Apple conference call later that day opened for questions, a Lehman Brothers analyst named Ben Reitzes gently asked the $64,000 question.
“A New York newspaper today called into question some issues around Steve and his health,” he said. “Would you mind addressing the situation?”
“Steve loves Apple,” replied Peter Oppenheimer, the company’s chief financial officer. “He serves as the C.E.O. at the pleasure of Apple’s board and has no plans to leave Apple. Steve’s health is a private matter.”
That was it. No insistence that he was cancer-free. No attempt to explain his gaunt condition. No nothing. When I spoke to Steve Dowling in Apple’s public relations department on Thursday, I got the same response. “Steve’s health is a private matter,” Mr. Dowling said. Then, just for good measure, he said it again. “Steve’s health is a private matter.”
But is it really?
•
There are no hard and fast rules about how and when companies need to disclose information about the health of their chief executives. In 1995, when Andrew S. Grove, then the chief executive of Intel, received a diagnosis of prostate cancer, he informed the company’s board and management. Intel. But he never told the company’s shareholders. Mr. Grove says now that because the cancer never impaired his ability to do his job, there was no reason to inform shareholders. (The world found out about Mr. Grove’s illness only when he wrote about it the following year.)
On the other hand, when Charles H. Bell received a diagnosis of colorectal cancer shortly after he became the chief executive of McDonald’s in 2004, the company quickly released the news. Mr. Bell resigned from the company that November, and died two months later.
“The question surrounding any kind of corporate disclosure always is: Is it material?” said Larry S. Gondelman, a lawyer with Powers Pyles Sutter & Verville. “And there is no bright line test in determining materiality.” A spokesman for the Securities and Exchange Commission said that the law defined materiality as information that “the reasonable investor needs to know in order to make an informed decision about his investment.”
No company has ever been held to account by the S.E.C. for failing to disclose information about its chief executive’s health, and I’m not suggesting that the S.E.C. should go after Apple for keeping mum about Mr. Jobs’s health. Indeed, I found plenty of people who felt he had every right to keep the information to himself. “As long as he is healthy, he doesn’t have to disclose,” said Charles R. Wolf, an analyst at Needham & Company. Roger McNamee, the well-known technology investor at Elevation Partners, said, “Because Steve Jobs has been appearing in public regularly, investors are getting a valuable form of disclosure.”
But if ever there was a chief executive who ought to feel some responsibility to tell shareholders about his health, it is Steve Jobs. First of all, he is not like other chief executives — he is, instead, the single most indispensable chief executive on the planet. As Mr. Wolf nicely put it, “Apple is Steve Jobs and Steve Jobs is Apple.” He added, “I think the stock would drop 25 percent or more if he were to leave the company unexpectedly.” When investors whisper about Mr. Jobs’s health, it’s not just gossip they are indulging in — his health really matters to Apple’s future.
Secondly, Mr. Jobs has had cancer, for crying out loud — and in the public mind, a particularly insidious kind. Although several doctors I spoke to say that the kind of cancer he had, and the kind of operation he underwent, give him a better-than-even chance of living a long and happy life, there are no guarantees with cancer. We all know that. Which is all the more reason why, at a minimum, Apple should flatten the rumor that his cancer has recurred — even if it won’t go further than that. “Not being able to provide a statement effectively dismissing the question is really unsatisfactory to most investors,” said A. M. Sacconaghi Jr., who follows the company for Sanford C. Bernstein.
The final reason, to be blunt about it, is that Apple simply can’t be trusted to tell truth about its chief executive. Under Mr. Jobs, Apple has created a culture of secrecy that has served it well in many ways — the speculation over which products Apple will unveil at the annual MacWorld conference has been one of the company’s best marketing tools. But that same culture poisons its corporate governance. Apple tells analysts far less about its operations than most companies do. It turns low-level decisions into state secrets. Directors are often left out of the loop. And it dissembles with impunity.
As, indeed, it has in this latest episode. On Wednesday, John Markoff reported in The New York Times that Mr. Jobs had had a surgical procedure earlier this year, the details of which remain unclear. I hear that he has had ongoing digestive difficulties, which have contributed to his weight loss — possibly a side effect of the surgery. And in the weeks leading up to the conference, he came down with an infection, which had a lot to do with why he looked so gaunt. It wasn’t cancer, thank goodness. But was more than a “common bug.” By claiming Mr. Jobs had a bug, Apple wasn’t just going dark on its shareholders. It was deceiving them.
It would be horrible if Mr. Jobs had a recurrence of cancer. I hope it never happens. At 53, he is in the prime of his life, the father of a young family. And for the rest of us, it’s exhilarating watching him work his magic in the marketplace. Steve Jobs has created more value and driven more innovation than just about anybody in business. Who doesn’t want to see what he’ll come up with next?
He also, though, needs to treat his shareholders with at least a modicum of respect. And telling them whether or not he is sick would be a good place to start.
On Thursday afternoon, several hours after I’d gotten my final “Steve’s health is a private matter” — and much to my amazement — Mr. Jobs called me. “This is Steve Jobs,” he began. “You think I’m an arrogant [expletive] who thinks he’s above the law, and I think you’re a slime bucket who gets most of his facts wrong.” After that rather arresting opening, he went on to say that he would give me some details about his recent health problems, but only if I would agree to keep them off the record. I tried to argue him out of it, but he said he wouldn’t talk if I insisted on an on-the-record conversation. So I agreed.
Because the conversation was off the record, I cannot disclose what Mr. Jobs told me. Suffice it to say that I didn’t hear anything that contradicted the reporting that John Markoff and I did this week. While his health problems amounted to a good deal more than “a common bug,” they weren’t life-threatening and he doesn’t have a recurrence of cancer. After he hung up the phone, it occurred to me that I had just been handed, by Mr. Jobs himself, the very information he was refusing to share with the shareholders who have entrusted him with their money.
You would think he’d want them to know before me. But apparently not.
Yet.
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