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Despite his folksy manner, Warren Buffett is not a man who likes to share intimate details of his life. So that makes his April 17 announcement that he has early-stage prostate cancer all the more intriguing. After all, as the chairman and chief executive officer of Berkshire Hathaway (BRK/B) stated, his doctors say the condition is "not remotely life-threatening or even debilitating in any meaningful way." In fact, he stressed in the release, "I feel great"”as if I were in my normal excellent health"”and my energy level is 100 percent." He has a point: By the age of 80, about 80 percent of men have some cancer cells in their prostate gland, according to the Journal of the American Medical Association. If Buffett is like most men his age, he's more likely to die with prostate cancer than from it.
So why bother? The answer, most likely, is to quash rumors that something more serious is going on. His disclosure is less an acknowledgement of his mortality than of his celebrity. As an investor whose every move is analyzed by people around the planet, the likelihood that Buffett could undergo two months of radiation therapy without anyone noticing is remote, if not impossible. Moreover, at 81, his mortality and succession planning"”or lack thereof"”is already the subject of much speculation. Any hint that he's not thriving on a steady diet of steak and Cherry Coke could send Berkshire Hathaway stock plunging if the company's iconic founder seems at all coy about his health. "It's not a matter of his illness, it's his age," says Charles Elson, a corporate governance expert at the University of Delaware. Like a starlet caught touching her tummy near a fertility clinic, Buffett knows all too well that he needs to control the message before rumors put him on the defensive.
Disclosing a CEO's health status is always tricky terrain. Witness Apple's (AAPL) now-famous mishandling of founder Steve Jobs's cancer and liver transplant. Even as Jobs became noticeably frail and took several leaves of absence to cope with the fallout of pancreatic cancer, investors were kept in the dark about what was ailing the leader, who died in October of last year. Apple didn't even disclose that Jobs had a liver transplant in April 2009. Investors learned about that months later from news reports. Apple's lack of disclosure about a man indelibly linked with his company became a textbook case on how not to handle a CEO's illness.
But Apple is hardly alone. Former Sara Lee (SLE) Chairman and CEO Brenda Barnes didn't reveal she'd had a stroke until weeks after it occurred. Charlie Bell was diagnosed with colon cancer just weeks after getting the CEO job at McDonald's (MCD) in 2004, but struggled with it for several months before stepping down. (He died a few months later at the age of 44.) American International Group (AIG), on the other hand, promptly announced that CEO Robert Benmosche had cancer soon after it was diagnosed in October 2010"”though it declined to reveal what kind of cancer he had. Still, the taxpayer-controlled company outlined a firm succession plan and posted an update on Benmosche's treatment four months later. (He remains CEO today.)
That doesn't mean investors should take comfort in Buffett's cancer disclosure. If anything, Buffett's illness is a stark reminder that investors remain essentially clueless about the board's succession plan. That's unacceptable at any public company, never mind one so strongly associated with an 81-year-old man. While Jobs was battling a much more serious form of cancer than anything Buffett faces, he was a relatively young man of 48 when it was first diagnosed. Buffett, on the other hand, has already exceeded the average male life expectancy in the U.S. And yet an octogenarian investor who's made a good part of his fortune in the realm of insurance continues to defy the logic of actuarial tables by refusing to acknowledge or plan for his own mortality. While his "health situation might change someday," Buffett stressed, "I believe that day is a long way off."
One hopes so. Then again, it may not be. One thing investors do know is that Buffett's idea of a succession plan"”which consisted of announcing in his annual shareholder's letter this year that he has chosen someone to replace him"”gets a failing grade from most board experts. The lucky guy (a scan of the senior ranks at least gives some clarity on the gender) doesn't even know he's been picked, and Buffett has consistently stressed that he has no plans to step down. So now anyone who doubts he's the chosen one has been given an extra reason to leave, just as his boss is heading into chemotherapy. ISS Proxy Advisory Services issued a report on April 2 in support of a shareholder proposal by the AFL-CIO Reserve Fund demanding that Berkshire's board adopt and disclose a detailed succession planning policy for replacing Buffett. The board opposes the resolution on the grounds that it has "identified the individual to succeed him."
Now that the world's most famous investor has decided investors deserve to hear about his cancer diagnosis, perhaps he'll show similar transparency when it comes to talking about succession, too. Then investors can take comfort in knowing that the care Buffett takes when it comes to his own health also extends to planning for the day when his company must go on without him.
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