Fiat Chief’s Death Raises Privacy Questions
(Bloomberg) -- Car boss Sergio Marchionne’s surprise death raises awkward questions about how much information ailing executives or their companies need to give the markets about health issues.
The revelation by a Zurich hospital -- where the 66-year-old died -- that he’d been under treatment for more than a year triggered a debate about whether he should have told his employer sooner about his condition or whether Fiat Chrysler Automobiles NV downplayed its gravity.
But lawyers say the lack of disclosure about his health shows how, in such circumstances, Europeans’ firmly entrenched rights to privacy can override obligations to share the news about a serious illness with investors.
“Protection of personal data is a fundamental right in Europe and privacy is the rule and disclosure of personal data the exception, especially when it comes to medical information,” said Tom De Cordier, a partner who specializes in privacy law at law firm CMS DeBacker in Brussels. “Under the GDPR,” the name of the European Union’s toughened privacy law, “medical and health-related data benefit from protection that is higher than for “normal” personal data.”
Fiat Chrysler first confirmed on July 5 that Marchionne had undergone a shoulder operation for an unspecified ailment that would require only a “short period of convalescence.” On July 21, the company named a successor and said Marchionne, an Italian-Canadian, would not be returning to work. Four days later he died in the Zurich hospital.
Fiat Chrysler has a complex structure, including in the EU. The company is resident in the U.K. with operative headquarters in Turin, Italy, and Detroit.
Crucially, the company said it had “no knowledge of the facts” regarding the illness of its former CEO until days before they announced his resignation, a statement backed up by his family.
“I don’t see how" the company can have broken the law if they didn’t know of his illness, said Richard Ufland, a corporate finance lawyer with Hogan Lovells in London. “The obligation is only to announce inside information clearly that you possess."
Hard to Judge
And then it’s also hard to judge whether information should be revealed to management in the first place.
Daniela Fabian, a Basel, Switzerland-based privacy lawyer, said that listed companies are obliged to provide disclosure in the event of price-sensitive facts, such as a change in management.
“Health related issued may constitute such a fact,” she said. “But at what point does a health issue become material?”
Hogan Lovells’ Ufland agreed, saying that in his view “the mere fact a CEO is ill” doesn’t trigger “any obligation to inform fellow board members where he reasonably considers that it is not going to have any material adverse impact on his ability to perform his duties for the foreseeable future."
The story has led to comparisons with the case of Apple Inc. co-founder Steve Jobs, who was credited with single-handedly reviving the fortunes of the tech giant. Shareholders praised Marchionne for the rescue of Fiat and Chrysler, and believed the future of a merged company was intertwined with his leadership.
The fact neither man was just another CEO is significant, said Richard Cranfield, a lawyer at Allen & Overy in London. "Most CEOs in the U.K. are not treated with such a ‘key-man risk’ designation.”
Marchionne, who had saved Fiat from bankruptcy when he took over in 2004 and then gone on to rescue Chrysler by putting the two companies together, was so important that the group’s annual report included a risk disclosure about him. Despite his planned retirement in April 2019, he “is critical to the execution of our strategic direction and implementation of our business plan,” it states.
Jobs told the public in 2009 he was struggling with a “hormone imbalance.” Within a fortnight he announced he was going on medical leave without giving details. It turned out the leave was for a liver transplant and Apple came in for criticism for not being more transparent, given his importance to the company.
For the boards of large, listed European companies trying to learn from the Marchionne case what they should do in future, there are really just two options and neither is easy, says Brussels lawyer De Cordier.
Both assume the CEO or top executive has informed them about their illness.
“Either the executive consents to the disclosure of information relating to his/her medical condition, or the information is disclosed under the ‘substantial public interest’ exception,” said De Cordier.
Weighing those two options is tricky with any CEO, said De Cordier. It would’ve been arguably tougher with someone like Marchionne who was open to discussing the company’s prospects with the press but was known to jealously guard his private life.
“This exception requires that a balance be struck between the various competing interests (the executive’s right to protection of his/her private life v. the interests of the company, its employees, shareholders, etc.),” said De Cordier.
“That,” he said, “is always a delicate and hard task.”
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