Laurie Hays and Serena Saitto offer an analysis of that issue at the Harvard Forum, which is focused on best practice and not the legal issues. They offer a 10-point list of factors for boards to consider with three leaping out as especially pertinent:
- Prioritize employees: Unlike conventional corporate announcements, the first audience to prioritize for a COVID-19 case should be employees, to reassure them about the health and safety of their leader and the steps the company is taking to assure the health and safety of the team, as well as the continuity of business as usual.
- Personal tone, rather than business: A COVID-19 email is first and foremost a personal update about an individual, their family, and what they are doing to stay safe. A personal note from the CEO is the best way to set a tone for calmness and continuity and assure all that proper measures have been taken.
- Admitting to testing positive: Removes the stigma and promotes togetherness in the fight.
I discussed the legal issues back in 2009 in connection with Steve Jobs' health:
There are two distinct issues here that we need to avoid getting bollixed up. First, was Jobs' health material? Under the prevailing standard, we need to ask whether there is a substantial likelihood that the reasonable investor would consider the information to be important in deciding to buy or sell Apple stock (or vote on a proxy or whatever). Assuming that Jobs' health was uncertain and the effects of treatment speculative, we would need to use the Basic v. Levinson test of whether the magnitude of the event (Jobs' death or retirement for health reasons) and the probability of it happening are high enough that the information becomes material under the foregoing standard.At first blush, you might say that Jobs is so important to Apple that a reasonable investor obviously would consider the information to be important. Yet, there are a number of doctrines in the materiality context that might lead to a finding of immateriality here. For example, as I explain in my Corporation Law and Economicstreatise, information about director misconduct frequently is deemed immaterial:The biographical information required of director candidates by the proxy rules includes such matters as bankruptcies, pending criminal charges and prior convictions, securities violations, and the like. To what extent must a director disclose other personal peccadilloes? Actual or potential conflicts of interest generally must be disclosed. But what about matters that go not to the loyalty and honesty of the directors, but rather to simple mismanagement?
Where plaintiff complains of noncriminal conduct allegedly constituting mismanagement, courts have been unwilling to require disclosure. In Amalgamated Clothing and Textile Workers Union, AFL-CIO v. J. P. Stevens & Co., for example, plaintiffs argued that the board of directors had either knowingly violated the labor laws or, at least, failed to prevent management from doing so. According to plaintiffs, this alleged misconduct had harmed the corporation’s reputation and exposed it to liability. The failure to disclose these purported facts in connection with the election of the directors allegedly constituted an omission of material facts. In rejecting plaintiff’s argument, the court distinguished conflicts of interest from allegedly illegal conduct intended to benefit the corporation. Only the former need be disclosed, as it would be “silly” to “require management to accuse itself of antisocial or illegal policies.”
A similar standard was set forth in Gaines v. Haughton. Defendants were directors of Lockheed Corporation, a major aerospace and defense firm, who failed to disclose in their proxy solicitation materials that Lockheed had made over $30 million in foreign corrupt payments. Paying bribes to foreign officials so that the corporation can get contracts may be immoral or even illegal, the court opined, but such allegations are not material absent charges of self-dealing. In addition, the court stressed the lack of a causal nexus between the alleged misconduct and the matter put to the shareholders for a vote. Because the shareholders were asked only to elect the board, not to approve the allegedly improper bribes, the bribes did not need to be disclosed.
As these cases suggest, there is a second issue here; namely, whether the corporation has a duty to disclose the information. The Basic case makes clear that withholding material information from investors is not illegal unless the company had an affirmative duty to disclose. Just as courts have been reluctant to deem personal information about directors material, so they have also been reluctant to deem it a subject as to which a duty of affirmative disclosure exists.
A relevant example of how these doctrines might impact the Jobs situation is provided by U.S. v. Heron, 525 F.Supp.2d 729 (E.D.Pa.,2007), rev'd on other grounds, the court rejected the Government's position that information is material simply because investors would want to know it: "Under that expansive standard, information as trivial and potentially invasive as the health of the CEO's marriage would become material since reasonable investors might “want to know” if he or she is so distracted." If the health of the CEO's marriage is immaterial as a matter of law, perhaps his health would also be immaterial.Neither the misconduct nor the marriage cases are on all fours with the Jobs case, of course. Neither the SEC nor the courts have provided clear guidance as to when disclosure obligations trump personal privacy in this areas. Given the social--and even constitutional--emphasis on personal privacy, surely it would be “silly” to “require management to accuse itself of [being ill].”
I don't think that the law has changed in the intervening period.
