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The Fallacy of Full Disclosure

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On March 22, there was an interesting commentary from Business Pundit on a CNN Money article regarding what limits should be for corporate boards to withhold information from shareholders. In this case, it is Apple’s CEO Steve Jobs and his choice of alternative treatment for his pancratic cancer.

Currently, regulations such as the Sarbanes-Oxley Act of 2002 require that material information be disclosed with all quarterly reports filed with the SEC. The question Business Pundit had in this context was “what is material?”

Understandably, he didn’t think to highly of Apple’s Board of Directors keeping quiet. In this context, it is completely understandable that the board was reluctant to say anything about it. After all, a large amount of Apple’s intrinsic value comes from their visionary CEO. A loss in the company’s share price affects the directors and shareholders, but the SEC needs to strike a balance between these interests. As with most situations with ambiguous rules, many companies (and Apple has been known to be one of them) take very aggressive interpretations. It will be interesting to see if the SEC adjusts their guidance to include officers of companies and their health conditions. I doubt they will change. Ambiguity allows the SEC to enforce encroachments on the rule as they see fit, so I believe they will maintain their current course.

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Written by walonline

March 29, 2008 at 11:25 am

Posted in Regulation

Tagged with , ,

One Response

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  1. […] Opinions, which looked at the most recent article in Forbes (which I linked to in a post from March 29) on this. The new piece of the debate surrounds a paper from Joan McLeod Hemingway, a professor at […]


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