I recently wrote about potential disclosure issues surrounding a corporate executive’s COVID-19 diagnosis. Regrettably, this is no longer a hypothetical issue. For example, Altria Group recently filed a Form 8-K announcing that its Chairman & CEO had contracted the virus and was taking a leave of absence, and Baxter International recently filed a Form 8-K disclosing that the company’s CFO and a member of its board of directors had tested positive for the virus.
We don’t know what prompted Altria and Baxter’s decisions to make public disclosure, but a recent Sullivan & Cromwell memo lays out a number of reasons why companies may opt to go public with this kind of information in the context of the COVID-19 crisis. As discussed in this excerpt, one reason to voluntarily make this disclosure is the high risk of a leak due to the public health response to the pandemic:
Due to the nature of COVID-19, including the recommended public health measures for containing its spread, there is a significant likelihood that a senior executive’s actual or presumed positive COVID-19 diagnosis will leak. Under the current public health recommendations, and pursuant to the COVID-19 related policies adopted by many companies, if an individual tests positive for the virus (or is presenting serious symptoms or has been in contact with someone who is diagnosed), the number of people both within and outside the company who will be aware of an executive’s actual or suspected illness is likely to be much higher than for another type of illness. Combined with the current public interest relating to COVID-19 infections, the likelihood of public dissemination is meaningfully increased.
The memo points out that voluntary disclosure when a leak is likely will give the company an opportunity “to present its assessment of the impact of an executive’s illness and plans in place for mitigating such impact, including implementation of any interim officer roles or succession planning and the potential impact on the rest of the company’s executive team and its board of directors.”
-John Jenkins, TheCorporateCounsel.net March 25, 2020
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