Should companies keep the public informed about the health of their CEO?

When and how much should CEOs disclose health-related challenges? Do key management personnel have the right to privacy? These questions often crop up

On March 22, the Princess of Wales, Kate Middleton, disclosed that she was undergoing treatment for cancer following a major abdominal surgery in January. The two-minute-15-second recorded video shocked the world, but ended months of conspiracy theories that had been swirling around the Royal family.

The announcement also brought forth a debate on public disclosure and accountability. But should what holds for the Royal family, which has recourse to the state exchequer, also stand for listed companies that raise funds from the public?
 

When and how much should chief executive officers (CEOs) disclose health-related challenges?
 

Do key management personnel (KMP) have the right to privacy?
 

These questions have often cropped up in the corporate world.
 

To be sure, regulatory requirements do not warrant disclosures on health issues unless it’s a “material event”, say experts.

 

Absence is felt
 

According to Anshul Prakash, partner, Khaitan & Co, the law does not consider a serious illness as such to be a trigger for disclosure. "However, for public listed companies, if a key managerial person or senior management personnel remains unavailable for 45 days, such a situation is required to be disclosed as a material event by the company. Such unavailability could emanate from illness or any other reason. So illness per se does not bring up the content for company's disclosure," Prakash explains.
 

According to Shriram Subramanian, founder and managing director of InGovern, it is not necessary to disclose serious health issues, as the key managerial personnel could well recover and serve for a long duration. However, companies — irrespective of health issues — should definitely have succession plans in place, not just for KMPs, but also for most roles within the company, he says.
 

“The NRC (Nomination and Remuneration Committees) should take charge of the succession plan and review it on a quarterly basis. If any KMP is indisposed for a while, the company should inform shareholders, or appoint an alternative, albeit temporary,” says Subramanian.
 

What about Corporate India’s larger than life CEOs?
 

Amit Tandon, founder and managing director of IiAS, points out that regulatory disclosure requirements in India mostly deal with the firm, with very little about the individuals themselves. “This is despite the CEOs often being brands in their own right, having an outsized influence on the firms,” he says. “Boards grapple with what to disclose about the CEO’s health, and then take the view that this is a personal issue that need not be disclosed. The shareholders expect that the board is in the know and is taking the appropriate call. But as the key man risk is real, boards are well advised to develop a framework around what to disclose and when to do so.”

 

India Inc’s disclosures
 

The instances of health disclosures in India Inc have been few and far between. In February 2016, HDFC Bank had disclosed in a regulatory filing about the cardiac surgery of its managing director, Aditya Puri.
 

In July 2021, Dabur India informed the stock exchanges that its non-executive chairman, Amit Burman, was undergoing treatment for a case of aneurysm and recuperating following a successful surgery. In August 2022, Burman resigned from the post of chairman, almost a year before the end of his five-year term. He continues as non-executive director.
 

Biocon’s 2021-22 annual report mentioned that John Shaw stepped down as a non-executive director with the company owing to health conditions, with effect from the conclusion of its 43rd annual general meeting held on July 23, 2021. Shaw, who played a key role in building the company, passed away in October 2022.

 

Global trend
 

The debate around health issue disclosures by companies transcends borders. 
 

Apple’s partial disclosure around Steve Jobs’ health even when he announced a six-month leave of absence in 2009 has often been a subject of debate. In August 2011, he resigned as the CEO and in October that year died from a relapse of pancreatic cancer.
 

In September 2019, Oracle announced that its co-CEO Mark Hurd was taking a leave of absence for unspecified health-related issues. He died in October.

However, Warren Buffet had made a detailed disclosure regarding his not life-threatening prostate cancer in 2012 and the course of treatment. J P Morgan CEO Jamie Dimon, in 2014, had also told employees he was being treated for throat cancer and that it was curable.

 

A focus area
 

Though health disclosures of KMPs are event-based, for India's top listed companies employee health and wellbeing are becoming a priority and an area of concern.
 

Most companies now believe that employee health has a direct bearing on productivity at the workplace, which ultimately affects the company’s own health (in other words, revenues and the bottom line). Most of the listed companies now follow the Occupational Health and Safety Management System (OH&SMS), an international standard that provides a framework for organisations to manage risks and improve OH&S performance.
 

At many companies, employee health is now part of their sustainability agenda and implemented by the safety, health, and sustainability or environmental committee of the board of directors. This is especially true for companies in the manufacturing, industrial, and mining sectors, where the risk of injury to employees is higher. For instance, the Safety Health and Sustainability (SHS) Committee of the Board of Directors of Tata Motors is an apex body that reviews performance once every 

four months.
 

At Reliance Industries, employee health is part of the health, safety and environmental risk that the company has to manage for the sustainability and continuity of its business.
 

Information technology services major Tata Consultancy Services also adopted OH&SMS standard across all its facilities. Public sector electricity generator NTPC lists employee health as a key concern and it is part of its materiality matrix that has a bearing on its sustainability index. FMCG major Hindustan Unilever lists health and wellbeing of its employees, and of their family members, in its extended value chain as its topmost priorities.

(With inputs from Ishita Ayan Dutt, Dev Chatterjee, Samie Modak, Krishna Kant, and Sohini Das)