Goldberg’s illness and death highlight business dilemma

David Strow

Friday, Oct. 20, 2000 | 11:08 a.m.

It is a question that has plagued corporate America for years -- how much should a company be obligated to tell investors and employees about the illness of its top executive?

It's a question that's been brought to the forefront in Las Vegas, following the Thursday death of Arthur Goldberg, chief executive of casino gambling giant Park Place Entertainment Corp.

Since Goldberg's brief hospitalization in June 1999, rumors that the Park Place chief executive's health was declining swirled through the industry. Park Place officials -- and Goldberg himself -- were just as adamant that his health wasn't an issue.

So the news that Goldberg had died caught just about everyone -- analysts, employees and competitors -- off guard. Privately, some Las Vegas gaming executives wondered Thursday why Park Place didn't reveal details about the seriousness of Goldberg's illness sooner.

Others say it really wasn't anyone's business.

"That's personal stuff," said Jason Ader, gaming analyst with Bear Stearns. "I don't feel there was any concealment."

It's a tough balancing act. On the one hand is the executive's right to privacy; on the other is the investor's right to material information.

"This really represents the ultimate conundrum for a company, when you have a high profile, very visible CEO who passes away," said Larry Barton, a Scottsdale, Ariz., crisis management consultant who works with the gaming industry. "The reality is, there are no rules that have been defined by the (Securities and Exchange Commission). There are no rules ... that have been agreed to in the gaming industry.

"These cases do occur fairly frequently. When serious illness strikes a company, the question of candor is at the core of public discussions."

Companies have handled the issue in different ways. In 1993, the chief executive of Tenneco Corp. publicly announced his diagnosis of brain cancer, then began giving interviews to assure analysts and investors that the transition to his successor would be smooth. The transition occurred in February 1994, and the CEO, Michael Walsh, died three months later.

In August 1999, when Southwest Airlines Chairman and CEO Herb Kelleher was diagnosed with prostrate cancer, he participated in a 30-minute conference call with reporters to announce the news. But an upbeat Kelleher described the disease as "mundane, routine" -- certainly nothing that would interfere with his task of running Southwest Airlines. And, at least to date, it hasn't, as Kelleher remains at the helm.

Park Place followed this course in June 1999, when Goldberg was first hospitalized. At the time, the company said Goldberg was being treated for an upper respiratory infection.

But before Thursday's announcement of his death, there was no notice that Goldberg had been hospitalized again.

Michael Kempner, spokesman for Park Place, said the reason was that Goldberg had not been hospitalized for long, and that his health declined suddenly. Kempner said he didn't know how long Goldberg had been in the hospital.

"This was not expected," Kempner said.

For Park Place, it was a serious event -- the loss of the man regarded as its father.

"It's very dramatic for Park Place," said Bill Eadington, director of the Institute for the Study of Gambling at the University of Nevada-Reno. "It's a bit like Steve Wynn stepping out of Mirage. You lose the person who has been head of state for awhile, and shaped (Park Place) in his own image."

Still, Eadington said he believed Park Place handled the rumors about Goldberg properly.

"The alternative, unless death is imminent, is that you put a death watch on someone, and I think that would be a poison pill for the stock," Eadington said. "My gut reaction is that they didn't have much choice (than to downplay rumors), and this was the right direction."

Barton agreed, saying that disclosing too much can sometimes spook investors and employees. News that Time Warner Chairman Steven Ross had prostate cancer "created some concern at Time Warner," he said, while news that Disney CEO Michael Eisner had suffered a heart attack caused "tremors in the marketplace."

However, "history is littered with highly competent CEOs who have continued a high-impact performance even when they're ill," Barton said. "President (Franklin) Roosevelt, who was extremely ill the last couple of months of his life, was still a good steward of the public trust."

"Did Park Place continue to perform well under (Goldberg's) stewardship (over the last several months)? We won't know the answer for several months."

Now, Park Place is working on finding a permanent replacement for Goldberg. In the meantime, Park Place Chairman Steven Bollenbach has more or less returned to the center of Park Place operations, providing general oversight to a team of four top executives who are running Park Place in the interim.

"The question for the management team (at Park Place) is two-fold," Barton said. "First, they must focus soundly on earnings, so questions (about candor) will be addressed positively. The second burden is to assure the marketplace that there's a sound succession plan."

Investors didn't react negatively to the news Thursday, as Park Place's stock finished up 25 cents in a strong overall day for Wall Street. But this morning, Park Place had fallen nearly 6 percent to $12.88.

Thursday's rise "shows high confidence in the management of the company," Barton said. "But it also shows that it was a superb day on Wall Street. The ultimate bounce or decline may take a few days to shake out."

Ader said he's confident the management team Goldberg put in place leaves the company in good hands.

"There's very strong property-level leadership, very good assets, a substantial amount of cash flow, and Steven Bollenbach has lots of experience leading large companies," Ader said. "Park Place is a very strong company."

Meanwhile on Thursday, tributes to Goldberg continued to come from Nevada's top gaming executives.

"Arthur Goldberg was a man of extraordinary energy and courage," Steve Wynn said in a Thursday statement. "This energy and courage allowed him to build a great company and a legacy which will go on for a long time. All of us in the gaming industry will miss the show."

"I think he was one of the most important forces in the gaming industry in the last decade," said Glenn Schaeffer, president of Mandalay Resort Group. "He created a powerful company, in today's Park Place, from the near ruins of Bally (Manufacturing) 10 years ago.

"In a crowded field, I think he came from almost nowhere to stand as tall as anyone. It's an impressive feat."

Private funeral services will be held for Goldberg today in New Jersey. A memorial service in Las Vegas may be scheduled as well, but no details have been announced.