Weekly Walk of Shame: Sara Lee

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This Motley Fool series examines things that just aren't right in the world of finance and investing. Here's what's got us riled up this week. If something's bugging you, too -- and we suspect it is -- go ahead and unload in the comments section below.

Today's subject: Are CEOs people, too? Sure, but the nation's chiefs are working hard as ever to convince us that there's binding connective tissue between Average Joe and Boardroom Jane. Each is due medical privacy under the law, the CEOs say.

And they have a point. The 14th Amendment to the Constitution guarantees equal protection under the law, and the Health Insurance Portability and Accountability Act (HIPAA) doesn't discriminate by salary. We're all human. We're all citizens.

But in the world of business and finance, we are not all equal. Steve Jobs could trade in his signature black turtleneck for a plaid, flannel hunter's special and a wire mesh hat with "CAT" emblazoned on the front, and he'd still be worth $5.5 billion and the 136th-richest person in the world, according to Forbes. His health and ability to perform as CEO of Apple (Nasdaq: AAPL  ) would still matter materially to the millions who own shares of the Mac maker.

Same goes for Sara Lee (NYSE: SLE  ) chief executive Brenda Barnes, who, in Jobsian fashion, took medical leave in May, and then two days ago announced that she's been recovering from a stroke.

Why you should be indignant: Disclosure is as much a right for shareholders as privacy is for those acting as stewards of other people's money. Barnes, like Jobs, is that sort of steward. She leads a company that's worth $9.8 billion in market value, does more than $12 billion in annual sales, and supports more than 41,000 full-time employees. But you wouldn't know that from the press release that initially announced her leave.

"We wish Brenda a speedy recovery and look forward to her return. Out of respect for Brenda's privacy, we will not be commenting further," said board member James Crown in the May 14 press release.

What's so infuriating about that initial release generally, and Crown's comment specifically, is that there's no disputing it without looking like a jerk. Of course we wish Barnes a speedy recovery! What soulless creature wouldn't? But tugging on our heartstrings, Sara Lee essentially got away with failing to disclose the full nature of what might have been a tragic material event.

Just imagine what the PR team at McDonald's (NYSE: MCD  ) went through when former CEO Jim Cantalupo died suddenly in 2004. I know something about this. As a still relatively new PR pro in the early '90s, I was on the receiving end of an emergency call from the executive team of a big client whose CEO, an iconic tech executive, had also died unexpectedly. I'll never forget working on that press announcement.

Defenders will tell you that Sara Lee has been in capable hands since Barnes stepped away. I have no doubt that's true. Chief Financial Officer Marcel Smits has an impressive resume. But that isn't really the point. Barnes, as CEO, had set direction for the company. Is Smits simply keeping Sara Lee on autopilot till she returns? Or is he setting direction and crafting new initiatives to win an ugly patent fight with Nestle, while staving off competitors Kraft (NYSE: KFT  ) and Tyson Foods (NYSE: TSN  ) ?

In a statement, Barnes suggests that the interim team is "executing" company strategy rather than setting it. That's fine, so long as Barnes is back soon. Yet I wouldn't be quick to assume that she will be. Strokes can cause permanent damage, and Barnes didn't disclose any timeline for her return in Monday's press release.

What now?
Fortunately, Apple and Sara Lee aren't the only models for how to handle disclosure in a situation like this. In April, Shuffle Master said CEO Timothy Parrott would be out four to six weeks to treat an intestinal infection. Chairman Philip Peckman has since assumed the role of interim chief.

Warren Buffett is right on this issue. "If I have any serious illness, or something coming up of an important nature, an operation or anything like that, I think the thing to do is just tell ... the Berkshire shareholders about it. I work for 'em. Some people might think I'm important to the company," he said in commenting on Apple's failure to disclose Jobs' liver transplant surgery last year.

Consequently, Berkshire Hathaway (NYSE: BRK-A  ) (NYSE: BRK-B  ) shareholders like me can be confident that, if Buffett were to take ill, I'd have all the facts before me, able to make an intelligent decision about what to do with my investing dollars. Don't Sara Lee's shareholders deserve the same courtesy?

Apple and Berkshire Hathaway are Motley Fool Stock Advisor selections. Berkshire Hathaway is also a Motley Fool Inside Value pick. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He had stock and options positions in Apple and a stock position in Berkshire Hathaway at the time of publication. Check out his portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool owns shares of Berkshire Hathaway and is also on Twitter as @TheMotleyFool. The Fool's disclosure policy is a sucker for sponge cake.

Read/Post Comments (5) | Recommend This Article (15)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 16, 2010, at 5:11 PM, vinceroach wrote:

    This is a simple issue. When someone does not make a disclosure just assume the worst. In this case: "our CEO is on indefinite medical leave, the company will be on autopilot until she returns, if in fact she returns. We have decided not to tell you anything else so you can assume that whatever you think, the truth is worse."

  • Report this Comment On June 16, 2010, at 5:59 PM, eldetorre wrote:

    Comparing Brenda Barnes and Steve Jobs is ridiculous! Steve Jobs is essentially irreplaceable a visionary who has continued to revolutionize

    an entire market sector.

    Barnes is pretty generic, as most CEOs are. Most could be easily swapped from one business to another.

  • Report this Comment On June 16, 2010, at 6:17 PM, vinceroach wrote:

    The value and capabilities of CEOs are not the same thing. When Carly Fiorina was leaving HP I addressed a graduate Business School class at BC on the topic of corporate leadership. They told me they felt Fiorina had failed and I said you have to ask what the objective was. Her objective clearly was to leave with a lot of money and she did that (boy did she do that). The problem is not that she was incompetent but that she was pursuing a goal different from the one the shareholders would have wished. Most CEOs have done so for about 50 years, and it only works out when the two sets of goals happen to mesh. As long as shareholders blindly sign and send in proxies to managment this will continue.

  • Report this Comment On June 16, 2010, at 8:30 PM, TMFMileHigh wrote:


    >>As long as shareholders blindly sign and send in proxies to managment this will continue.

    If only I could rec a comment. +1, sir. Well done.

    Thanks for reading and for the comment,

    Tim (TMFMileHigh and @milehighfool)

  • Report this Comment On June 16, 2010, at 9:56 PM, dgmennie wrote:

    So, "Steve Jobs is essentially (an) irreplaceable visionary" like we are hurting for visionaries? What we are hurting for is transparency at the top, both corporate and political. We the people (or we the shareholders) usually don't have a clue as to what is really going on until it is too late. And those who run things certainly plan to keep it that way.

    Yes, we have a great economic/political system. The best that money can buy. Just ask any billionare (assuming you can get past the lawyers and the bodyguards).

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