March 21, 2011
Anyone who chooses to enter public life — like a movie star, athlete or CEO — tacitly agrees to cede considerable privacy.
While movie stars may expect paparazzi to interrupt their dinners, CEOs are learning that their privacy, too, may become a casualty of fame.
Many executives are now discovering that the media is reporting on their activities not only in the business sections but also in the gossip columns. Topics range from illness to sexual peccadillos to official misconduct. This unveiling of public figures’ private lives affects their companies’ reputations and their stock performances, especially when an organization handles a situation poorly.
Broaching this territory presents a delicate challenge for PR professionals because the boss often doesn’t seek out, or want, advice on personal matters — especially from an employee. Yet the CEO needs such advice to protect the company’s interests.
Health is often a critical issue
Two high-profile corporations, Apple and Sara Lee, have seen the effects of being less than forthcoming when health problems sidelined their CEOs. In both instances, the information vacuum was unsettling to all stakeholders.
During the past three years, Apple has consistently concealed and misrepresented the nature and severity of CEO Steve Jobs’ illness. In January, Jobs announced that he was taking another leave of absence to “focus on his health.” He didn’t give any indication of the seriousness of his condition or when he might return. Shareholders, employees and other constituents were left wondering and worrying.
Sara Lee also failed to address former CEO Brenda Barnes’ illness. Meanwhile, several suitors have lined up to acquire or divide up the company. When Barnes took medical leave in May 2010, the company released a mind-boggling statement: “We wish Brenda a speedy recovery and look forward to her return. Out of respect for Brenda’s privacy, we will not be commenting further.”
Barnes headed a company with nearly $10 billion in market value, $12 billion in annual sales and 41,000 employees. Surely, the people affected were entitled to know more than a two-sentence statement. Does her privacy trump the rights of shareholders, employees and others who are affected by the situation?
For Barnes, a distinguished career would soon be over. In June, she announced that she had suffered a stroke; and two months later, she stepped down permanently. It took the board of directors five months to put a successor in place.
Is there a connection between the company’s lack of transparency and what has happened since: the languishing of the stock price and the selling off of a company in parts? It’s hard to say. But there is no question that the company mishandling Barnes’ leave has increased the view that Sara Lee is a rudderless organization and a shaky investment.
The issue goes beyond medical disability. One has to examine what people have a right to know in terms of a CEO going through a messy divorce, entering alcohol or drug rehab, or falsifying expense reports. Any of these can impact the executive’s ability to lead or to continue in office. There is a fine line between what is private and what stakeholders deserve to know.
Providing too little information, or giving misinformation, can take a heavy toll on a company’s reputation. People invent what they don’t know. Twitter may be ablaze with every kind of theory imaginable about a person or company. Shareholders, employees and other constituencies may lose confidence in the company. PR professionals may be barraged with questions that top management refuses to let them answer, embarrassing both the individual and the company.
Deciding how much a company should disclose in a situation like this can be difficult.
What does the public have a right to know about and how far should an organization go to protect the CEO’s privacy? Does the right to privacy apply when someone who leads a huge organization is unable to perform — even temporarily?
One thing is certain: If bad news is forthcoming, then it should come from the company, not from third parties. Otherwise, the story can quickly spin out of control.
How to manage a CEO’s leave of absence
Here are some things that PR professionals should recommend to their companies’ leaders when handling issues like a CEO’s leave of absence:
• Don’t lie, deceive or mislead. Ever.
• Give some indication of the severity of the condition or problem and the length of time that the boss will be out of the office.
• Provide some detail about whether the CEO will be active in company affairs during the period of absence and to what extent.
• Indicate who will be assuming which responsibilities in the interim.
• Give assurance — accompanied by a quote from the CEO — that the organization’s major initiatives will continue moving forward in the interim.
Warren Buffett, the chairman of Berkshire Hathaway, summed up a leader’s obligation this way in an interview with CNBC on June 24, 2009: “If I have any serious illness, or something coming up of an important nature — an operation or anything like that — I think the thing to do is just tell…the Berkshire shareholders about it. I work for them. Some people might think I’m important to the company.”
As usual, Warren got it right.
Virgil Scudder is the author of the upcoming book “World Class Communication: How Great CEOs Win with the Public, Shareholders, Employees and the Media.” He is president of Virgil Scudder & Associates, based in New York.