On John Mackey's Yahoo Postings: Market Manipulation or Free Speech?
It was recently revealed that Whole Foods CEO John Mackey posted numerous comments (over 1100 according to the NY Times), over the course of about eight years, on Yahoo's message board on stocks, and did so under a pseudonym. As one might expect, Mackey talked up Whole Foods' stock and disparaged competitors, such as Wild Oats Market, which Whole Foods is currently attempting to purchase over SEC objections that such a takeover would reduce competition.
A number of people have responded critically to the revelation of Mackey's postings, while Peter Gerdes argues that such criticisms amount to an attack on free speech. Those who argue that Mackey acted wrongly by posting claim that he was attempting to influence the price of his company's stock, and that as CEO it was inappropriate for him to be doing so in this way. The idea seems to be that by posting anonymously Mackey misrepresented himself, because readers of the site would assume that he was merely someone who followed the company's stock and business practices, and not someone directly involved with the company, let alone the CEO. Mackey's insider knowledge of Whole Foods', the critics seem to think, made it inappropriate for him to post anonymously on a forum such as Yahoo's, since that knowledge could be used to selectively inform readers, and perhaps paint an overly rosy picture of the company's prospects. Former SEC chairman Harvey Pitt even says that "if anything is inaccurate or selectively disclosed [Mackey] would...be violating the law."
Gerdes, however, claims that it is extremely unlikely that anonymous postings such as Mackey's could have any effect on a stock's price, since readers are not likely to take such postings seriously. He suggests that Mackey was merely posting in order to entertain himself, and cites his frequent postings to his personal blog on Whole Foods' website in order to back up the claim that Mackey seems to use such postings as a way to amuse himself. Furthermore, Gerdes claims, one does not give up his free speech rights when he becomes CEO of a company, and since there would be nothing wrong with you or me anonymously posting positive comments about Whole Foods, there can be nothing wrong with Mackey doing so either.
Now while Gerdes is right that, so long as he did not post false statements, Mackey did nothing illegal, I'm not convinced by his argument that there is nothing at all that should trouble us about Mackey's behavior. As I've argued in previous posts, free speech is, in my view, valuable mainly because it provides for the open exchange of ideas between people who are mutually attempting to get at the truth. One can violate what I take to be the spirit of free speech without violating any laws, and just because one's conduct is legally protected under the 1st amendment (which Mackey's may very well be) does not mean that it cannot be legitimately criticized.
Discussion forums such as the one that Mackey posted to can be excellent vehicles for the kind of exchange of ideas that I believe makes free speech valuable and worth protecting, so long as those posting do so with the aim of pursuing truth. Attempting to persuade others to adopt one's own views is a legitimate part of this process so long as in doing so one is also willing to listen to and consider what others have to say, and to revise one's own beliefs if the evidence, or the arguments of others, warrants doing so. But when someone enters the discussion with an agenda, and with the intention of pushing that agenda no matter what (for financial or other reasons), the entire discussion is corrupted. Now we might think that when the discussion is about which stock purchases will make one the most money (as opposed, say, to loftier topics such as the nature of morality, or topics of greater significance, such as what to do about the mess in Iraq) we should not be overly concerned about the integrity of the debate. But it seems to me that we should still have some concern, since the undermining of the integrity of debate in one area is likely to spill over into others.
Am I wrong? What should we think about Mackey's postings?
A number of people have responded critically to the revelation of Mackey's postings, while Peter Gerdes argues that such criticisms amount to an attack on free speech. Those who argue that Mackey acted wrongly by posting claim that he was attempting to influence the price of his company's stock, and that as CEO it was inappropriate for him to be doing so in this way. The idea seems to be that by posting anonymously Mackey misrepresented himself, because readers of the site would assume that he was merely someone who followed the company's stock and business practices, and not someone directly involved with the company, let alone the CEO. Mackey's insider knowledge of Whole Foods', the critics seem to think, made it inappropriate for him to post anonymously on a forum such as Yahoo's, since that knowledge could be used to selectively inform readers, and perhaps paint an overly rosy picture of the company's prospects. Former SEC chairman Harvey Pitt even says that "if anything is inaccurate or selectively disclosed [Mackey] would...be violating the law."
Gerdes, however, claims that it is extremely unlikely that anonymous postings such as Mackey's could have any effect on a stock's price, since readers are not likely to take such postings seriously. He suggests that Mackey was merely posting in order to entertain himself, and cites his frequent postings to his personal blog on Whole Foods' website in order to back up the claim that Mackey seems to use such postings as a way to amuse himself. Furthermore, Gerdes claims, one does not give up his free speech rights when he becomes CEO of a company, and since there would be nothing wrong with you or me anonymously posting positive comments about Whole Foods, there can be nothing wrong with Mackey doing so either.
Now while Gerdes is right that, so long as he did not post false statements, Mackey did nothing illegal, I'm not convinced by his argument that there is nothing at all that should trouble us about Mackey's behavior. As I've argued in previous posts, free speech is, in my view, valuable mainly because it provides for the open exchange of ideas between people who are mutually attempting to get at the truth. One can violate what I take to be the spirit of free speech without violating any laws, and just because one's conduct is legally protected under the 1st amendment (which Mackey's may very well be) does not mean that it cannot be legitimately criticized.
Discussion forums such as the one that Mackey posted to can be excellent vehicles for the kind of exchange of ideas that I believe makes free speech valuable and worth protecting, so long as those posting do so with the aim of pursuing truth. Attempting to persuade others to adopt one's own views is a legitimate part of this process so long as in doing so one is also willing to listen to and consider what others have to say, and to revise one's own beliefs if the evidence, or the arguments of others, warrants doing so. But when someone enters the discussion with an agenda, and with the intention of pushing that agenda no matter what (for financial or other reasons), the entire discussion is corrupted. Now we might think that when the discussion is about which stock purchases will make one the most money (as opposed, say, to loftier topics such as the nature of morality, or topics of greater significance, such as what to do about the mess in Iraq) we should not be overly concerned about the integrity of the debate. But it seems to me that we should still have some concern, since the undermining of the integrity of debate in one area is likely to spill over into others.
Am I wrong? What should we think about Mackey's postings?
posted by Brian Berkey at 2:47 AM
http://www.blogger.com/comment.g?blogID=18266847&postID=7718660800662134411&isPopup=true Comments:
Pseudonyms have long been used by writers. Unless we're prepared to commit several fallacies (genetic, authority), source does not mean content.
It is entirely appropriate to use anonymity to state facts, beliefs, and opinions, but it is inappropriate to ascribe those views to someone existent who does not have those views.
Mackey operated within the appropriate domains. If he was passing "insider trading" information, that would be illegal. But, if he is simply commenting, it's the comments, not their author, that should be evaluated. Mackey does not profess "expertize" under his pseudonym, and offers no reason to think he is an "expert."
But even "experts" are wrong. Leaders are also "wrong." Authorities mislead with misleading content. Content must not be confused for its source (genetic fallacy). If a source proves unreliable, then I suggest one consider the source but not its opinions.
Although Gerdes makes a good point about Mackey’s right of free speech, Gerdes does not take into account Mackey’s role as a CEO of Whole Foods. Even if Mackey did not post any false statements, he did post positive information that could influence other readers. Mackey could have a great deal of influence despite being anonymous since he posted not a few times but over 1100 times, giving other readers reasons to believe Mackey. Furthermore, if Whole Foods is doing well, Mackey’s positive comments about Whole Foods might give him more validity.
Furthermore, as a CEO, Mackey has the responsibility to be fair to all shareholders by not stating any additional information about Whole Foods to the community of interested stock buyers. Any person in a position of obtaining information that has yet to be public, and has possibly leaked the information to the public, has done wrong. Even if no information was leaked, involving oneself in an activity where there is a possibility of information leaking is unethical as information can be misinterpreted.
Nirali,
I'm interested in your comment about it being unfair to shareholders for someone in Mackey's position to leak information to the public. I hadn't thought about this issue, and I'm wondering what it is that you think is problematic about a CEO putting information in the public sphere.
Of course if Mackey put out information that it would be illegal for company insiders to trade on, that would be one thing. But I can't imagine why he would do THAT, since it wouldn't benefit him financially, but could only benefit those of the message board's readers who acted on the information. If Mackey simply posted facts about his company that had previously been unavailable to the public, I don't think I'd have any objection. What troubles me is that it seems that Mackey was doing much more than simply providing facts.
So do you think that there could be a problem with someone in Mackey's position just putting facts that aren't widely known about his company in the public domain. If so, why?
I believe that while Mackey had not broken any laws, he is however being unethical. He is not a regular joe that goes into these message boards and express what he think the company might/might not happen. Rather he is the CEO of the company giving out information that was suppose to be secret. It might be true the information given was not too important but by the amount of messages posted brings doubt in my mind. If the message did pertain sensitive important, it give a unfair advantage to the reader that uses the yahoo message board versus the one that doesn't.
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