CEO Sexual Harassment Insider Trading

The normal way to pay a public-company CEO involves giving him mostly stock, so if he wants to lead a fancy lifestyle, he will eventually need to sell some of his company’s stock to fund it. And so if a CEO has a long history of sexual harassment, then he will also inevitably have a history of:

  1. Selling stock,
  2. While he knows about the harassment,
  3. And the shareholders don’t.

Is this insider trading? Is he trading while in possession of material nonpublic information about his own company, information that he has a duty to his shareholders to disclose (or else to abstain from trading)? I mean … yes, right? It is a little hard to see the argument the other way.[4] He knows some stuff, the shareholders do not, it’s about his job, it is clearly (in hindsight, anyway!) material to the stock price, boom, insider trading.

— Matt Levine