The Steve Jobs Situation: When Health Disclosures Matter

| About: Apple Inc. (AAPL)

I know, I'm a bomb-thrower when it comes to rhetoric aimed at CEOs and others in industry that do things I think are disgusting.

But the news out of Apple (NASDAQ:AAPL) yesterday, as reported by Bloomberg, really took the cake:

Apple Inc. Chief Executive Officer Steve Jobs, a cancer survivor, was granted medical leave of absence to focus on his health.

"Granted"? It's not like the board could say no.

There's a legitimate debate on how private a high-ranking executive's health really should be, especially in a circumstance like Apple's, which has a cult following that generates a huge percentage of its sales; that cult is also very much tied to the CEO.

The problem from my perspective is this: Something like that doesn't magically appear on the MLK holiday, and timing is everything.

In this case, it stinks.

Let's be frank: Earnings are due out today. The Jobs announcement is one that, if you could wait on making, you would. Dropping this now implies strongly that it couldn't wait -- that it's serious enough, and has urgency high enough, that Jobs was literally about to keel over and needed the rest.

The underlying issue is that he "survived" pancreatic cancer, which usually kills people that get it. I know, he had a "less lethal" form of it -- so it is said. But the liver transplant was for an unknown reason; some speculation is that his cancer of the pancreas may have metastasized there, necessitating the transplant.

If that's the case, then the odds are extremely good that all he did was buy time at a considerable cost.

Of course that's not how it was spun at the time, if you remember. Indeed, the premise sold to everyone was that the long-term prognosis was good. But did anyone ever get a definition of "long-term"?

There's nothing particularly wrong with spending all your money (or as much of it as you'd like) to extend your life. Indeed, this has been one of my frequent refrains in the health care debate: We're all mortal, and we have to have a very public and loud debate on exactly what you're owed if you have no money to pay for anything on your own. If you do have the money to pay for it on your own, knock yourself out -- it's your cash; spend it however you wish.

But in Apple's case, we already have a board that, it appears, either was kept in the dark or intentionally hid Jobs' medical condition originally. There was no 8-K filing contemporary with the event, nor any full and fair explanation of exactly what was going on.

Whether a corporation has an obligation to file an 8-K under circumstances like this -- where the chief executive's health is in question, and whether that CEO has an obligation to disclose himself -- is an open one. There are fair arguments on both sides.

But irrespective of this, and whether there will ever be a penalty applied by the SEC, this circumstance points out the risk that one takes in buying a "cult stock"; you're placing a bet on the health of the CEO, and health is a fragile thing -- much more so than a corporation in general, which is formed for the specific purpose of insulating a going concern from the possible demise of its officers. This is especially true when the CEO has a history of pancreatic cancer and a liver transplant, and the company has been less than entirely forthcoming about either.

Unfortunately, the practice and pattern that we have seen in the past -- dropping this sort of news when you cannot react to it -- continues. Apple's stock was down about 7% in Germany yesterday.

If you're a cash investor, you were stuck until today.

Here's my question: Is this 2011's microstrategy?