So the big financial story of the day is the revelation that John Mackey, the CEO of Whole Foods posted anonymously on the Yahoo finance site. Unsurprisingly he tended to say good things about his company (and his haircut) while dissing his competition (Wild Oats which Whole Foods is now trying to purchase). In short he behaved like every other fanboi on the internet, he just liked his own company rather than the one that made his computer CPU. But because he is the company CEO everyone is getting really worked up about this. Frankly I don’t see what the big deal is.

While some people are demanding the SEC punish Mr. Mackey the expert opinion I’ve seen suggests that there is nothing inherently unlawful about a CEO who posts anonymously:

For an executive to use a pseudonym to praise his company and stock “isn’t per se unlawful, but it’s dicey,” said Harvey Pitt, a former Securities and Exchange Commission chairman. Told of the Mackey posts, Mr. Pitt said, “It’s clear that he is trying to influence people’s views and the stock price, and if anything is inaccurate or selectively disclosed he would indeed be violating the law.” He added that “at a minimum, it’s bizarre and ill-advised, even if it isn’t illegal.”

Now I don’t know SEC regulations very well at all and I’ve been confused for a long time how they can be as far reaching as they are without coming into conflict with the first amendment but the idea that this sort of thing might be illegal just seems absurd and in clear tension with the first amendment¹. If Mackey had been posting carefully selected bits of verifiable information with the intent of manipulating the stock price that would be one thing but the frivolity and blatant partisanship in many of his posts makes it pretty clear he was just entertaining himself. Of course some commenters seem unwilling to believe that a CEO might have the same motivations for posted as Intel and AMD fanbois:

“For the head of one company to be using an alias to criticize another in a fairly prominent posting site seems to me not worthy of someone at that level of trust. What is he up to?” asked Buie Seawell, a professor of business ethics and legal studies at the University of Denver. “Any jerk can post anything on the Internet. But for the jerk to be the head of a corporation and to say he did it just for fun, that is just (baloney).”

I’m totally baffled why a CEO who posts anonymously is any less trustworthy than any of the other anonymous posters who frequent these boards. It seems the argument is that he must have been trying to manipulate the stock price but it isn’t like posting crap on the internet is something only us mortals can enjoy. In fact Mr. Mackey is well known for posting extensively on his official blog and one would think if his goal had been to influence stock prices he would have both used an effective anonymizing service (like Tor) and tried to appear less obviously partisan. So if we have little reason to suspect he was motivated by malicious intent what is the reason to distrust him?

Other commenters, while obviously outraged give even less explanation of what the grave sin Mr. Mackey committed.

Never mind the obvious regulation FD concerns: It’s just wrong! If a CEO wants to have his own blog on his own company’s website that is vetted by the company’s legal counsel — you won’t find any argument here.

To post on outside message boards, especially using an alias, not only shows poor judgment but strikes to the heart of a company’s culture and makes you wonder what else might not be quite right.

Once more the justification for infering that this is troublesome (circularly) rests on the assumption that it’s really bad. To be fair the poser probably takes the underlying problem with this behavior to be so obvious that it doesn’t need to be said but I just don’t see it. My best guess is the poster thinks it’s wrong because it puts the company at risk of regulatory action or perhaps the worry is that it harms the companies public image. But while financial types might get very worked up about this I can’t see shoppers changing the ir habits because they were assured that the CEO violated some non-intuitive cannon of business ethics so that leaves the worry about SEC regulation. Even though the above quote from a real expert suggests that he didn’t actually do anything illegal one might still fear this would encourage them to block the attempted takeover. However, according to the WSJ the big problem with the merger were the real life comments Mackey made to his board suggesting the merger would reduce competition. So if the accusation is that Mackey recklessly risked shareholder’s value the criticism should be focused on these totally conventional remarks rather than the anonymous internet postings.

Except for the amusing, but highly unlikely, theory that this criticism is an attempt by his rivals to respond in kind the only thing which seems to explain the disproportionate criticism Mackey is coming in for the anonymous postings compared to other, potentially unwise but relatively minor issues, is the non-traditional nature of his behavior. Still it’s entierly possible that I’m just missing something the buisness people think is obvious. If so hopefully this post will provoke them into explaining what makes his behavior so horrible. But whatever one might think of the prudential concerns of this sort of behavior I think it’s clear that the SEC ought not to be able to punish CEOs for these sorts of comments.

After all becoming a CEO doesn’t mean you fall into some sort of first amendment exception and the statements Mackey made in his posts were obviously his opinion and almost certainly not part of some intentional plan to manipulate the stock market. Surely we would not believe a law that let the government punish any blogger who remarked about a company whose stock he owned passed constitutional muster so what makes this situation different? After all the harm to the stock market is really the same whether or not this guy is a CEO or just a stock owner since he is posting anonymously. In fact posting anonymously actually reduced the potential for misinformation as people are much more likely to confuse a CEO’s opinion with factual claims than some random guy on the net. So unless we are prepared to say that a CEO doesn’t have the right to express his opinion about the company he runs and his competition without fear of punishment at all it shouldn’t be acceptable to punish Mackey in this case.