Forbes.com – The CEO Health Dilemma

January 6, 2009    

By: Matthew Kirdahy

Original Article: Forbes Online

What lesson does Steve Jobs’ medical situation offer for the rest of us?

What’s more important? The personal health of the one visionary leader behind an organization with some 17,000 employees, or the company’s plans for survival without him?

Long term, it’s all about the latter. The management pipeline is what must guide a company to prosperity, not one exalted ruler. That’s why no matter how forthcoming a company is about a CEO’s health, as Apple (nasdaq: AAPL – news – people ) says it was yesterday about Steve Jobs, shareholders should never panic. (Apple’s share price rose on the news.)

There should be no grounds for panic. The question to be asking isn’t, “What’s a hormone imbalance and what does it mean for the fiscal quarter?” It’s, “Who will take over when he’s gone?”

“I’d be asking fewer questions about Steve’s health and more about the talent behind Steve,” says Scott DeRue, management professor at Michigan University’s Ross School of Business. “People see Steve and Apple as one and the same. They’re not.”

It all speaks to the importance of having a reliable succession plan or, at the very least, of practicing some preventative maintenance. Is there a doctor in the house?

For decades, CEO health has blindsided the shareholders and directors of public firms. Often even a clearly mapped succession plan isn’t foolproof.

In 2004, McDonald’s (nyse: MCD – news – people ) CEO James Cantalupo died suddenly of a heart attack at age 60. The fast food chain named Charlie Bell as his successor. Months later, Bell had to resign to undergo treatment for colon cancer.

The media has speculated about who will fill Jobs’ shoes at Apple one day, but the company has no public official lineup. His health first became an issue in 2003, when the company reported that he had been successfully operated on for pancreatic cancer. Questions about the matter broke out again last summer, causing another scare for investors.

Jobs recovered well in 2003 and returned to work, but questions lingered about how much public companies should reveal about their CEOs’ health. Is the boss’s medical condition material, to put it in legalese, to the success or failure of the business?

“You don’t have to make a quarterly statement,” says John Coffee, a Columbia University law professor. CEOs do have a right to keep tight lips on their personal health.

Succession planning aside, how about avoiding this situation altogether?

Some companies have begun offering especially thorough physical exams, well beyond what insurance would cover, for their top executives. Call it another form of risk management.

According to the latest Executive Compensation Survey by Compdata Surveys, a private research firm, 43% of public and private companies with annual revenues of $3 billion or more offer their execs an annual physical exam. Of companies in the $1 billion to $3 billion annual revenue range, 33% do so. The percentage declines with the size of the firm.

Dr. Edward Goldman, founder and chief executive of MDVIP, a network of physicians offering medical exams that assess a patient’s health more completely than a traditional trip to the physician would, says executive health is the fastest growing segment of his nine-year-old business. Companies are finding it more economical to pay for such an assessment now rather than waiting for a leader to fail because he’s ill.

MDVIP, based in Boca Raton, Fla., serves 105,000 patients at 300 medical practices throughout the U.S. About 10% of them, nearly 11,000 patients, are executives, and some run America’s largest public companies, Goldman says.

“The emphasis on disease prevention is woefully inadequate,” he adds.

So is the notion of vaunting one manager above all else when he, like everyone, is a mere mortal.

Original Article: Forbes Online

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