Companies Have Discretion Over Whether to Disclose Coronavirus Infections
March 13 2020 - 8:33PM
Dow Jones News
By Kristin Broughton
Companies are thinking through how or even whether they would
disclose potential Covid-19 infections of executives.
U.S. companies aren't required to tell investors if their
executives test positive for the infection that comes from the
novel coronavirus, but they may have a strong incentive to do so,
securities lawyers say.
U.S. companies have wide discretion when it comes to disclosing
medical information about top executives, lawyers said, and there
is no legal requirement compelling companies to do so. Instead,
companies are guided by the concept of materiality -- that is,
whether a reasonable investor would find the information important
in making an investment decision, lawyers said.
But how companies interpret that concept has varied, at times
prompting backlash from investors.
Through late Friday, no major U.S. company had appeared to make
a disclosure about an executive with Covid-19.
But BT Group PLC, one of Europe's largest telecommunications
companies, disclosed Thursday that its chief executive, Philip
Jansen, tested positive for the coronavirus. The diagnosis set off
an internal effort to alert staff and prompted a wave of
self-disclosures from executives at other telecom companies who
recently had come in contact with Mr. Jansen.
While companies have leeway on executive medical disclosures,
they often have a strong incentive to provide timely information,
said David Martin, a securities lawyer at Covington & Burling
LLP. Doing so prevents employees from leaking information and
investors from raising questions about why a CEO is no longer
appearing in public, he said.
"There's a practical issue: Does the company feel like it has to
communicate with employees?" Mr. Martin said.
Symptoms from coronavirus infections are mild for most people
and include a fever, cough or aches. The risk of severe symptoms or
death are higher for older people or those with underlying medical
conditions.
A Securities and Exchange Commission spokesperson declined to
comment.
The way Apple Inc. handled disclosures about the health of Steve
Jobs prompted backlash from investors, stirred debate about what
boards should tell investors about ill leaders and CEO succession
plans, and fueled a push for greater federal oversight.
Apple said in January 2011 that Mr. Jobs, its CEO and
co-founder, would go on medical leave, providing little indication
at the time about the severity of his sickness, though he had
previously battled pancreatic cancer. He died nine months
later.
Apple didn't immediately respond to a request for comment.
Health disclosure decisions tend to revolve around the severity
of an illness and whether an executive can perform the job or will
need to step aside temporarily.
This month, JPMorgan Chase & Co. disclosed that CEO James
Dimon had undergone emergency heart surgery, saying that the bank's
co-presidents, Gordon Smith and Daniel Pinto, would run the bank in
his absence. Mr. Dimon has been released from the hospital and is
recovering at home, the bank said Thursday.
"There has been no consistent practice on how this plays out,"
said Michael Hermsen, a partner focusing on securities law at Mayer
Brown LLP. "So some companies have provided disclosures, and some
have not until the CEO dies or otherwise has to step away from the
company."
Mark Maurer contributed to this article.
Write to Kristin Broughton at kristin.broughton@wsj.com
(END) Dow Jones Newswires
March 13, 2020 20:18 ET (00:18 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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