The Big Questions Companies Face When a CEO Grows Sick

Oscar Munoz was hospitalized 37 days into his job as the CEO of United Continental, and just a week before the company was to report its first earnings update under his leadership. The airline would not confirm the reason, but news reports have said Munoz suffered a heart attack.

It's yet another challenge for a board of directors that already had its hands full: United's board has been dealing with the fallout from a federal corruption probe, managing the transition to a new CEO after the prior one resigned amid those investigations, and monitoring a turnaround to repair its relationship with customers and employees.

Add to that the challenge of handling the hospitalization of its brand new CEO, and United's board is faced with a particularly sensitive and complex set of circumstances to manage. "I can't think of a situation in recent memory when you had two things like this happen to CEOs within 40 days," said Mark Rogers, the chief executive of BoardProspects, an online community for directors. "There's a lot happening in this company. It's a good lesson for crisis management."

So far, United has issued two statements about Munoz. On Friday, it shared only that he had been admitted to the hospital the day before and that the company would "provide further details as appropriate." Then on Monday, it released a statement from the company's non-executive chairman that the board anticipated it would "conclude the corporate governance process necessitated" by Munoz's hospitalization, and "expects to release more details either later today or tomorrow."

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A United spokeswoman declined to provide further details to The Washington Post about the company's plans or the cause of Munoz's hospitalization.

There are not specific guidelines from the U.S. Securities and Exchange Commission about what companies should say about a CEO's illness. Yet both the SEC and the New York Stock Exchange do say companies should share anything that is "material," or that a reasonable investor would want to know, according to John Coffee, a professor at Columbia Law School who specializes in corporate governance and securities law.

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There are numerous questions that boards grapple with when it comes to disclosures about a CEO's health-where the line of privacy should be drawn, what impact the CEO's prognosis could have on the stock, how quickly the company should share news and still respect the CEO's family. But according to corporate governance experts, the biggest question for United's board, as well as many others, is who will manage the company as the CEO recuperates.

After all, investors don't necessarily want an hour-by-hour update on a CEO's health. "What they really want to know is how is the board going to respond to this information," Coffee said. "[United has] begun to do that by saying there's a corporate governance process, but I think they need to say more."

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Others aren't surprised to see that the airline is taking some time to orchestrate its response. Munoz was the chief operating officer of railroad giant CSX and sat on United's board when he was named to the job. He hadn't risen through the company's ranks, being groomed to become CEO-and he wouldn't have had his own succession plan in place after only about a month leading United.

Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware, said it would be unreasonable to think United should have announced a plan any faster. "Who would have expected something like this? No one would have a succession plan together," Elson said. "[Munoz] was only 56 years old, he was not elderly."

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While it may have been too soon for the board to have a plan in place, at least one of United's board members may have particular insight into how to manage this difficult scenario. Walter Isaacson, the CEO of the Aspen Institute, sits on the airline's board and wrote the biography of Steve Jobs-whose own battle with pancreatic cancer led to hard and controversial choices for Apple's board about when, and how much, to disclose.

© 2015 The Washington Post