The Wall Street Journal’s editorial page weighs
in today on the subject of John Mackey and his sock-puppetry.
"Apparently U.S. financial regulators don’t get the joke," says the
leader-writer, although I can’t see anyone else smiling in here.
That’ll teach Mr. Mackey to flog the virtues of his company on the Web…
we can’t see how any reasonable person could conclude that Rahodeb’s opinions
were going to have any appreciable effect on the Whole Foods share price.
The fact that they weren’t was precisely the point: At a time when corporate
execs are often accused of being isolated, Mr. Mackey seems to have enjoyed
the Web engagement and used the semi-informed opinions voiced on a Yahoo message
board as his own sounding board to sample the mood of his customers.
The straitjacket that has descended on CEOs, including Sarbanes-Oxley and
the SEC’s Regulation FD ("Fair Disclosure"), has often had the perverse
effect of restricting the flow of information — and thus preventing informed
corporate insiders from participating in the market’s increasingly democratic
information free-for-all. In some cases, these prohibitions only keep news
and informed views under wraps, leading to volatility and "surprises"
that can themselves create incentives for insider trading.
All this is predictable enough, coming as it does from an editorial page which
will always oppose any kind of SEC regulation at all. But it’s worth spelling
out exactly why it’s wrong, and noting that SEC chairman Christopher Cox is
actually extremely blog-friendly:
On his blog, [Jonathan] Schwartz, chief executive of Sun Microsystems, challenged
the commission to clarify that the use of blogs like his could be consistent
with our regulations requiring public companies to share news with the public
at the same time they give it to market professionals. As a result of that
exchange, the SEC is moving forward on that initiative, aided by thoughtful
commentary from outside our own cathedral, some of it found on blogs.
The fact is that Mackey, or any other executive, is more than welcome to "flog
the virtues of his company on the Web", whether doing so has "any
appreciable effect on the Whole Foods share price" or not. Mackey has his
own blog, which accepts
comments, and which other bloggers are more than welcome to link to. He doesn’t
post there very often – certainly not nearly as often as he posted to
the Yahoo message boards. But if he simply moved his Yahoo postings to his personal
blog, and used his own name to invite the particpants on the Yahoo boards to
join him over at wholefoodsmarket.com, then no one would have any problem with
what he did.
It is true that compliance types tend to be scared of Reg FD, and would rather
err on the side of saying nothing rather than risk falling foul of it. And frankly
I’ve been unimpressed
at criticism of Mackey which has concentrated on Reg FD, rather than the simple
ethics of what the CEO of a public company should and shouldn’t do. But Reg
FD can and will be clarified so that blog posts count as public disclosure,
at which point no blog post, by definition, can run afoul of it. And I very
much doubt that Cox’s SEC would go after a CEO who posted about his own company
on his own blog.
"The market’s increasingly democratic information free-for-all" is
here to stay, and that’s a good thing, which has been embraced by the SEC. What
Mackey did is a bad thing, and the SEC is investigating it. Let’s not get the