October 19, 2015

Corp Fin: A Minor Restructuring

Corp Fin is in the process of combining the two examination groups devoted to reviewing filings made by financial service firms – AD Offices 7 and 12. So there will now be 11 AD groups; not 12. This restructuring unwinds a small piece of the moves that then-Corp Fin Director Meredith Cross made five years ago by reverting back to having only one banking group. The Assistant Director of AD7 stays the same – Dieter King – as Suzanne Hayes moves over as Assistant Director of AD1 to fill the slot opened up by Jeffrey Riedler’s retirement. Our own “Corp Fin Organization Chart” has been updated for all of these moves…

United’s CEO & The Tricky Disclosure of Health Issues

This WSJ article brought the sad news that the new United Continental Holdings CEO had a heart attack last Thursday. It also raises the tricky disclosure issue about how many details do investors deserve to know. I’ve blogged several times about my own thoughts on this challenging topic (those blogs are linked to from this one). Here’s an excerpt from the WSJ article:

United, in a brief statement early Friday afternoon, said it had been “informed by Oscar’s family that he was admitted to the hospital on Thursday and we will provide further details as appropriate. In the meantime, we are continuing to operate normally.” United declined to comment further on Friday.

Companies whose leaders experience serious illnesses face a delicate balance between investors’ right to know and the desire to protect the executives’ privacy—one that boards often struggle with, management experts said. Apple Inc. long kept co-founder Steve Jobs’s health issues under wraps, even during his two extended medical leaves. Apple board members never disclosed the specific reasons for the absences, decisions that raised the ire of some shareholders. Mr. Jobs died in 2011 after battling pancreatic cancer. More recently, Goldman Sachs Group chief Lloyd Blankfein disclosed a lymphoma diagnosis last month shortly after receiving the news from his doctor. He said he planned to continue working through treatment.

Robert Robins, a retired Tulane University professor of political science who has studied how companies handle executive illness, said United should divulge more detail than was included its brief statement. Mr. Munoz and his fellow directors have an ethical obligation “to be fully candid with shareholders about the nature of his illness and the prospects for his returning to his job,’’ Mr. Robins said. United’s general counsel, Brett Hart, was previously at Sara Lee Corp. when, in May 2010, the food company said CEO Brenda Barnes was taking a temporary medical leave. Sara Lee didn’t provide details about its likely duration or underlying cause, and some shareholders complained about the level of disclosure. Nearly a month later, the food maker said Ms. Barnes had suffered a stroke. She soon stepped down. United didn’t respond to a request to speak to Mr. Hart.

United’s directors Friday were hoping to find out more information about Mr. Munoz’s condition soon, then decide whether the airline requires an interim leader, the person familiar with the situation said. Depending on how long Mr. Munoz is disabled, “there are a few [United] executives who could be interim [CEO] for a short period of time,” this person added. “It could be a mild heart attack, and he could be back in two weeks,” the person said.

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Broc Romanek