The death of CSX Corp. CEO E. Hunter Harrison just two days after the railroad announced his medical leave resurrects questions about just how much companies should disclose about the health of their leaders.
Harrison, 73, died Saturday of "unexpectedly severe complications from a recent illness," CSX said without elaborating. Harrison had been turning around CSX since being hired in March, as he had previously done at three other railroads. News of his declining health had pushed the company's shares down the most in more than six years on Friday.
Like former Apple CEO Steve Jobs, who battled pancreatic cancer before his death in 2011, Harrison had both health problems and a reputation that buoyed shares in his company. Harrison had bypass heart surgery in 1998 and missed work in 2015 because of pneumonia and the implant of stents in his legs. Before CSX hired him, he declined the company's request for an independent doctor to review his medical records.
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In May, the Wall Street Journal reported Harrison's use of supplemental oxygen. In response, he said: "Don't judge me by my medical record, judge me by my performance."
CSX investors cheered Harrison's performance, sending shares up about 60 percent this year through Dec. 14, hours before his medical leave was disclosed. Shareholders had approved paying him $84 million he relinquished under a contract at Canadian Pacific Railway, and Harrison said he planned to guide CSX for the course of his four-year contract.
The stock fell 3.3 percent, to $51.16, in premarket trading Monday in New York, following a 7.6 percent decline Friday, the biggest drop since September 2011, after the medical leave was announced.
"We are confident that our disclosures are adequate and appropriate," Bryan Tucker, a CSX spokesman, said via email on Sunday.
U.S. Securities and Exchange Commission rules don't require companies to disclose serious health problems in the executive suite, said Allan Horwich, a partner at Schiff Hardin and Northwestern University law professor. That said, a company couldn't issue half-truths or lie about an executive.
"The most important thing is whether there were statements made by the company since he was hired that were inconsistent with the true state of his health at the time, and whether the company knew that," Horwich said. "Did they knowingly or recklessly omit facts in what they said about the management team that would expose them to liability?"
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Disclosures are judged by what the company knew in assessing the future, he said.
"If things didn't turn out as they expected, that doesn't mean that the company lied or that the disclosure was defective," he said.
Disclosure rules for a key executive also must weigh that individual's right to privacy, said Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware.
"This is the classic example of when an individual's health is tied dramatically to the success of a company, it becomes a matter of disclosure," Elson said. Harrison's pay "would suggest that his presence at the company was considered incredibly important to shareholders, and therefore his health would be relevant."
Such situations always raise the risk of litigation, Elson said. "Any time that people are disappointed and feel the company wasn't as forthright as they should have been, you'll see litigation," he said. "But how does anybody know when their time is up?"
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