Rip Ragged

Tim Beyers wrote a follow up to his hit piece on Apple’s BOD. It’s posted on Fidelity’s site. I don’t know why. It’s just as silly as the first one.

Here we go…..

I’ve taken a beating for daring to challenge Apple’s board of directors and its decision to keep quiet about CEO Steve Jobs’ liver transplant. So be it. I still believe the board failed to disclose a material event.

Very few of you agree. Instead, you seem to think I should shut up and be happy with my generous gains. If only I expected less.

You took a beating for challenging, not “daring to challenge.” You challenged a company with 30 Billion USD in the bank. That means they probably have access to legal minds better than yours. Further, it was a material event about an employee who was, at the time, on medical leave. There was a CEO and management team in place. They seemed to do fine. Very few of us see the melodrama and tragedy from a hit-whore perspective.

A better ending to this saga
Your comments, many bristling with righteous anger, delivered a machine-gun litany of counterarguments designed to put me in my place:

• “He didn’t die!”
• “The stock is up!”
• “The iPhone 3G S is a hit!”
• “What the [expletive] is your problem?”

Purple prose translated: Here are excerpted disagreeing comments taken completely out of context in a way that makes commenters look like angry clods.

The End Justifies the Means! But of course, it doesn’t — not in life, nor in stocks. Does the following statement from Jobs, given in January, suggest to you in any way that he might be facing an illness so serious that within months, he’d need a liver transplant?

Unfortunately, the curiosity over my personal health continues to be a distraction not only for me and my family, but everyone else at Apple as well. In addition, during the past week I have learned that my health-related issues are more complex than I originally thought.

If the answer is “no,” then didn’t the board have an obligation to disclose, especially when research says that roughly one in four patients who need a liver transplant dies before receiving one?

Actually, Steve Jobs’ statement in no way changes the disclosure laws, or the board’s obligations under those laws. Purple prose be damned. “The end justifies the means” is a popular and meaningless bit of righteous indignation. It’s a standard fall-back for those with no real argument.

The Apple that (gulp) could have been
Raise your hand if you’d still be holding shares of Apple right now, were Jobs no longer with us. No doubt many of you still would be, but I’d bet good money that a number of you wouldn’t. The board knows this, too. That’s why you’ll find a definite warning on page 21 of Apple’s latest 10-K annual report.

“Much of the Company’s future success depends on the continued service and availability of skilled personnel, including its CEO, its executive team and key employees in technical, marketing and staff positions,” the document reads. [Emphasis mine.]

Of course the company had to make some reference to the CEO with all the angst and speculation in the press. Every company in like circumstances would have to make some mention of the current situation. This is making a molehill out of a horseturd for later use as foundation for a mountain.

For comparison’s sake, neither Microsoft (Symbol : MSFT) nor Hewlett-Packard (Symbol : HPQ) nor even Dell (Symbol : DELL) refers to its chief executive so pointedly. Jobs is that different, that important, that material.

Very few CEOs stand on a similar pedestal. One of the few who does criticized Apple on CNBC last week: Berkshire Hathaway (Symbol : BRK/A)’s Warren Buffett.

Very few CEOs are put on such a pedestal by the press. Apple doesn’t put him on that pedestal; the shareholders don’t put him on that pedestal. The financial press does. Apple shareholders aren’t selling in the midst of all this hullaballoo.

On page 18 of Berkshire’s 10-K, also under risk factors, the company’s disclosure reads:

“Investment decisions and all major capital allocation decisions are made for Berkshire’s businesses by Warren E. Buffett, Chairman of the Board of Directors and CEO, age 78, in consultation with Charles T. Munger, Vice Chairman of the Board of Directors, age 85. If for any reason the services of Berkshire’s key personnel, particularly Mr. Buffett, were to become unavailable to Berkshire, there could be a material adverse effect on the Company.”

Buying and selling investments is the ENTIRE business of Berkshire Hathaway. ALL of the decisions for buying and selling are made by W.E.B. Warren Buffett IS Berkshire Hathaway. When he dies, there is no management team in place that can pick up where he left off. Steve Jobs is NOT all of Apple. Steve Jobs has put the company in a good position to carry on without him. Warren can’t do that in short order. To draw an equivalency there is absurd.

A taut, fine line
Losing Jobs would hurt Apple, just as losing Buffett would hurt Berkshire. Yet one commenter to my original story about this raises a perfectly good and perhaps irrefutable point.

“The company and the SEC have no right to the disclosure of Steven Jobs’ medical history,” wrote Foolish reader Puffin100. “There is a more important law in this matter called HIPAA, that protects our right to medical privacy.”

Again, no. Not “just as.” The circumstances are as different as night and day. Apple can continue to be Apple without Steve Jobs. Berkshire Hathaway cannot continue to be Berkshire Hathaway without Warren Buffett.

And the refutability of the point of that particular commenter would have to be determined after a whole lot of lawyers did a whole lot of talking.

Fair enough. One of our own Foolish attorneys, when asked about this, said in an email that she thinks there’s definitely a tension or conflict between HIPAA and Regulation FD, the securities law that defines disclosure requirements. The SEC doesn’t specify just how much information a company must disclose about its executives’ health.

Moreover, the SEC has a checkered history when it comes to prosecuting cases involving Regulation FD. Schering-Plough (Symbol : SGP) paid $1 million in fines in 2003 after its investor-relations chief was accused of selectively disclosing negative, non-public material information.

But the agency also chose not to take action against John Mackey, the CEO of Whole Foods Market (Symbol : WFMI) . In 2007, Mackey was found to have been making disparaging comments about Wild Oats Market, a rival he later acquired, under a pseudonym on a Yahoo (Symbol : YHOO)! Finance discussion board.

These two unrelated cases are about negative disclosure and libel/slander which have no meaning in discussing the medical condition of a private citizen.

Long live my Apple shares
So perhaps your cockeyed stares are well-deserved. I’m nonetheless standing by my story. I’m also standing by the stock.

The end doesn’t justify the means, but it also doesn’t justify a sale. The board’s actions, while deplorable, have no impact on product strategy — a strategy I still believe in as a shareholder. And let’s be honest: My criticisms matter more if I’m an Apple shareholder, an owner with skin in the game, than if I’m merely an observer. I have a vested interest in seeing the people on Apple’s board get disclosure right.

They haven’t yet. I’ll keep writing, and keep holding, in hopes that they do.

I’m hanging on to my Apple shares, too. If you believe that the board’s actions with regard to Steve Jobs’ health have no impact on product strategy then what is all the fuss about? Steve Jobs’ value to the company is nothing if not related to product strategy. You’ve just negated your entire argument: Apple is product strategy. Steve Jobs is Apple. Disclosures about The Master’s health have no impact on product strategy.

Shut up.

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Oh. And speaking of sexy videos….