After Oscar Munoz missed a summit with United Airlines union leaders, the carrier told employees that their new chief executive officer “was unable to attend.”
He had suffered a heart attack, a person familiar with the matter said, and United didn’t confirm his hospitalization until almost 24 hours later. For a company that had just brought in a new boss to shore up its business, the lag time between the emergency on Thursday and its disclosure on Friday was too long, recruiters and scholars said.
“Shareholders don’t have a right to know what the CEO had for dinner,” said Erik Gordon, a professor with the Ross School of Business at the University of Michigan. “But the argument about privacy goes out the window if the CEO has a serious health issue.”
Munoz became United Continental Holdings Inc.’s CEO in September after Jeff Smisek was ousted amid a federal investigation into the airline’s ties to the former chairman of the Port Authority of New York & New Jersey. Amid labor discord, recurring computer failures and an on-time arrival rate lagging other big carriers, the board turned to Munoz, former president of railroad CSX Corp., to boost performance and fix the culture.
The carrier’s difficulties date to its formation in the 2010 merger between former United parent UAL Corp. and Continental Airlines. Some of the unions still operate under contracts with their predecessor companies, and Munoz has made greater communication a focus since he got the job, saying he recognized “the journey hasn’t always been smooth.”
United declined to say Friday whether anyone had temporarily assumed Munoz’s duties, nor would it say why he had been hospitalized. A spokeswoman, Megan McCarthy, also declined to respond to the remarks by corporate-governance specialists about United’s handling of the situation.
The company’s only comment, she said, would be its official statement, which read: “We have been informed by Oscar’s family that he was admitted to the hospital on Thursday and we will provide further details as appropriate. In the meantime, we are continuing to operate normally.”
A CEO’s pay and power make that executive a vital component of a company’s value, the University of Michigan’s Gordon said, and investor interest and disclosures by other companies have helped build expectations that companies will reveal their leaders’ health issues. Gordon cited the examples of Jamie Dimon at JPMorgan Chase & Co., Goldman Sachs Group Inc. CEO Lloyd Blankfein and Berkshire Hathaway Inc.’s Warren Buffett.
When there is a crisis in this era of instant communication, a company needs to be prepared with a response immediately, said Laura Pincus Hartman, a business ethics professor in the department of Organizational Behavior at Boston University Questrom School of Business.
“When a company has intentionally created a sense of confidence in its investors, based on the strength of the CEO, they then create for themselves and obligation to be transparent of the status of that strength,” Hartman said. “When a company is transparent, the investing public and other stakeholders reward that transparency.”
The parent company’s shares fell 3.1 percent to $55.97 at the close Friday in New York, joining a decline among most U.S. carriers. United’s 16 percent drop this year compares with the 5.8 percent slide for the Bloomberg U.S. Airlines Index.
Companies have a responsibility to give as detailed a response as possible to avoid any uncertainty that could damage the stock or undermine confidence, said Tim McNamara, managing partner of executive recruiter Boyden Global Executive Search in Washington.
“It’s important that people don’t have to speculate and that the company discloses as much information as possible” about who is in charge in the interim, McNamara said.
–With assistance from Michael Sasso in Atlanta and Julie Johnsson in Chicago.