Friday, July 13, 2007

Stupid CEO Tricks

Being the CEO of a publicly-traded company carries with it significant responsibilities, including avoiding making public statements that call into question compliance with the federal securities laws and the judgment of the corporation's leader.  Unfortunately, the CEO (and co-founder) of Whole Foods may have come awfully close to violating SEC rules, and certainly called into question his judgment, when he posted a number of entries on Yahoo investor bulletin boards touting his company and trashing rival Wild Oats Markets.  The postings (indexed here), made under the pseudonym "Rahodeb" -- a play on his wife Deborah's name -- were cited by the FTC in its antitrust lawsuit to block the merger of the two leading natural food supermarket chains.  The statements could well violate SEC Regulation FD, which mandates broad disclosure of any corporate statement, and possibly even Rule 10b-5 if the statements inflated the value of Whole Foods' shares.  It's not clear whether a claim for either violation would stick, but I suspect Whole Foods' corporate counsel was more than a little miffed to learn the CEO was making statements that fall outside the normal run of corporate disclosures without telling anyone.  My colleague Steven Davidoff, on the increasingly important M&A Law Prof Blog notes (here): "In the end, the Whole Foods-Wild Oats saga highlights for attorneys the problems of head-strong clients/CEOs who likely do not take advice well, as well as the perils of second requests.  But just because you have a dumb CEO still doesn't justify the FTC actions challenging Whole Foods' proposed acquisition of Wild Oats.  As far as I know, there is no stupidity provision in the antitrust laws though some may argue there should be one in the law generally."  (ph -- and I confess to stealing Steve's blog post title)

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