Arthur Levitt thinks corporate executives can do a better job. The former Securities and Exchange Commission chairman opined yesterday that public companies should prevent top executives from borrowing against their equity stakes.
Levitt’s comments were made in reference to the situation at Green Mountain Coffee Roasters, which recently revoked its chairman’s and lead director’s board titles after they had taken out loans against their company stock and sold shares during a time when they should not have done so.
After Green Mountain’s founder and chairman Robert Stiller and lead director William Davis had taken out the loans, a margin call then instigated the forced sale of the coffee company’s shares on Monday after it had released less-than-stellar quarterly earnings.
The company regulatory filing showed that the two execs had posted Green Mountain’s shares as collateral for the loan.
"The perception of management borrowing against their own holdings is so bad," Levitt told a group of Reuters editors and reporters, the news service says. "I would encourage shareholders to push companies to implement such protections where they don't currently exist.”
Levitt also said that he would favor regulation by stock exchanges or other bodies.
