SEC commissioner scolds CEOs who sell their companies' shares during stock buybacks they've authorized
- "That's not necessarily insider trading or fraud. But it is troubling," says the SEC's Robert Jackson Jr.
- "I'm asking if the stock is cheap then why is the executive selling into the buyback," he adds.
- Jackson is seeking an "open comment period" on the agency's buyback rules, which he says have not been touched in 15 years.
Robert Jackson Jr., a commissioner of the Securities and Exchange Commission, is calling out CEOs who authorize stock buybacks and then sell their personal shares during those repurchase programs.
"That's not necessarily insider trading or fraud. But it is troubling because when an executive does a buyback they're suggesting to the market the stock is cheap. I'm asking if the stock is cheap then why is the executive selling into the buyback," Jackson told CNBC's "Squawk Box" on Tuesday. He did not name any executives or companies.
While saying he's OK with paying executives in stock, Jackson did contend a buyback "is not necessarily the right time and place to dump your shares into the market." He's seeking an "open comment period" on the agency's buyback rules, which he says have not been touched in 15 years.
"The question I want to ask when we are looking at our buyback rules … are we undermining executive incentives to manage for the long term," said Jackson, one of four commissioners under SEC Chairman Jay Clayton. Before he was sworn in this year, Jackson was a professor at the NYU School of Law.
The idea that there are factors contributing to short-term thinking in the C-suite was recently addressed on a different front by J.P. Morgan Chase Chairman and CEO Jamie Dimon and Berkshire Hathaway Chairman and CEO Warren Buffett.
Earlier this month, Dimon said the Business Roundtable group of CEOs has thrown its support behind companies backing away from issuing quarterly earnings guidance. Dimon is currently chairman of the BRT.
Buffett joined the cause and appeared with Dimon on CNBC for a rare joint interview, during which they both said that ending the outlook practice would allow CEOs some breathing room to manage companies for the long haul instead of always trying to manage results to meet near-term expectations.