Can a CEO short his own company?
That would be the ultimate in insider trading. They made a stock transaction knowing in advance what was going to happen to the share price. They could easily expect to face jail time, plus the CEO would still face lawsuits from the board of directors, the stockholders and the employees. "mhoran_psprep has answered the question well about ""shorting"" e.g. making a profit if the stock price goes down. However a CEO can take out insurance (called hedging) against the stock price going down in relation to stocks they already own in some cases.    But is must be disclosed in public filings etc. This may be done for example if most of the CEO’s money is in the stock of the company and they can’t sell for tax reasons.    Normally it would only be done for part of the CEO’s holding." "If we take only the title of the question ""can the CEO short the stock"": It was probably different before Enron, but nowadays a CEO can only make planned trades, that is trades that are registered a very long time before, and that cannot be avoided once registered. So the CEO can say ""I sell 100,000 shares in exactly six months time"". Then in six months time, the CEO can and must sell the shares. Anything else will get him into trouble with the SEC quite automatically. I don't know if shorting a stock or buying options can be done that way at all. So it's possible only in the sense of ""it's possible, but you'll be in deep trouble"".  Selling shares or exercising share options may indicate that the company's business is in trouble. If the sale makes that impression and everyone else starts selling because the CEO sold his shares, then the CEO may be in trouble with the board of directors. Such a sale would be totally legal (if announced long time ahead), but just a bad move if it makes the company look bad. Shorting sales is much worse in that respect. If the CEO wants to buy a new car, he may have to sell some shares (there are people paid almost only in share options), no matter where the share price is going. But shorting shares means that you most definitely think the share price is going to drop. You're betting your money on it. That would tend to get a CEO fired, even if it was legal." Yes. It's called executive hedging, and it's a lot more common than most people know. As long as it's properly disclosed and the decision is based on publicly available information, there's technically nothing wrong with it.  Krispy Kreme, Enron, MCI, and ImClone are the most notable companies that had executives do it on a large scale, but almost every company has or had executives execute a complex form of hedging known as a prepaid variable forward (PVF). In a PVF, the executive gives his shares to an investment bank in exchange for a percentage of cash up front. The bank then uses the executive shares to hedge in both directions for them. This provides a proxy that technically isn't the executive that needs to disclose.  There's talk about it needing to be more public at the SEC right now. http://www.sec.gov/news/statement/020915-ps-claa.html (yes, this should probably be a comment, not an answer ... but it's a bit long). I don't know what the laws are specifically about this, but my grandfather used to be on the board of a company that he helped to found ... and back in the 1980s, there was a period when the stock price suddenly quadrupled One of the officers in the company, knowing that the stock was over-valued, sold around a third of his shares ... and he got investigated for insider trading.  I don't recall if he was ever charged with anything, but there were some false rumors spreading about the company at the time (one was that they had something that you could sprinkle on meat to reduce the cholesterol).  I don't know where the rumors came from, but I've always assumed it was some sort of pump-and-dump stock manipulation, as this was decades before they were on the S&P 500 small cap. After that, the company had a policy where officers had to announce they were selling stock, and that it wouldn't execute for some time (1? 2 weeks? something like that).  I don't know if that was the SEC's doing, or something that the company came up with on their own. It seems also on some international markets this is allowed. http://www.businessinsider.com/li-hejun-shorting-hanergy-2015-5
"Diversify into leveraged short/bear ETFs and then you can quit your job and yell at your boss ""F you I'm short your house!"" edit: this is a quote from Greg Lippmann and mentioned in the book ""The Big Short""" They can, at any time, unless it explicitly says otherwise in the bylaws, kick the CEO out for any reason.  In many cases, I believe his salary is dictated by the board of directors (elected by the shareholders iirc), as it couldn't be feasibly done so by anyone else, since they work for him (her). Oh the company I work for now.  Victim of a poor CEO that has turned into poor leadership across the board. There are directors I'd love to meet, act very interested in why they do things the way they do. The interest wouldn't even be faked. I'm genuinely curious how someone could have so many stupid ideas. Then tell them they suck and they're fired. The typical structure of an HFT group is very small and flat. A few dozen people (maybe). The firm's capital is at risk, so the principals are usually very involved in what everyone is doing. I haven't seen any of these guys take up the title CEO. There is some truth to this. But the reverse could be seen as Apple. Where they did this, and it blew up until they gave it back to Jobs.  Similarly, Bezos seems to be doing a good job as CEO. Gates and Ellison also were pretty successful!  I agree though that when companies start to get major investors/go public, there should be some planning/thought to see if the Founder/CEO is actually a CEO type "Vitalik has mentioned this in a comment but I think it ought to be expanded upon: Companies that aren't already penny stocks really don't stand to gain anything from trying to prevent short interest.  Short selling does not inherently lower the stock price - not any more so than any other kind of selling.  When somebody shorts a stock, it's simply borrowed from another investor's margin; as long as it's not a naked short resulting in an FTD (Failure To Deliver) then it does not add any ""artificial"" selling pressure. In fact, shorting can actually drive the price up in the long term due to stops and margin calls.  Not a guarantee, of course, but if a rally occurs then a high short interest can cause a cascade effect from the short ""squeeze"", resulting in an even bigger rally than what would have occurred with zero short interest.  Many investors actually treat a high short interest as a bullish signal. Compare with margin buying - essentially the opposite of short selling - which has the opposite effect.  If investors buy stocks on margin, then if the value of that stock decreases too rapidly they will be forced to sell, which can cause the exact same cascade effect as a short interest but in the opposite direction.  Shorting is (in a sense) evening out the odds by inflating the buying pressure at lower stock prices when the borrowers decide to cover and take profits. Bottom line is that, aside from (illegal) insider trading, it doesn't do businesses any good to try to manipulate their stock price or any trading activity.  Yes, a company can raise capital by selling additional common shares, but a split really has no effect on the amount of capital they'd be able to raise because it doesn't change the actual market cap, and a dilution is a dilution regardless of the current stock price.  If a company's market cap is $1 billion then it doesn't matter if they issue 1 million shares at $50.00 each or 10 million shares at $5.00 each; either way it nets them $50 million from the sale and causes a 5% dilution, to which the market will react accordingly. They don't do it because there'd be no point." "Learn something new every day... I found this interesting and thought I'd throw my 2c in. Good description (I hope) from Short Selling: What is Short Selling First, let's describe what short selling means when you purchase shares of stock. In purchasing stocks, you buy a piece of ownership in the company. You buy/sell stock to gain/sell ownership of a company. When an investor goes long on an investment, it means that he or she has bought a stock believing its price will rise in the future. Conversely, when an investor goes short, he or she is anticipating a decrease in share price. Short selling is the selling of a stock that the seller doesn't own. More specifically, a short sale is the sale of a security that isn't owned by the seller, but that is promised to be delivered.  Still with us? Here's the skinny: when you short sell a stock, your broker will lend it to you. The stock will come from the brokerage's own inventory, from another one of the firm's customers, or from another brokerage firm. The shares are sold and the proceeds are credited to your account. Sooner or later, you must ""close"" the short by buying back the same number of shares (called covering) and returning them to your broker. If the price drops, you can buy back the stock at the lower price and make a profit on the difference. If the price of the stock rises, you have to buy it back at the higher price, and you lose money. So what happened? The Plan The Reality Lesson I never understood what ""Shorting a stock"" meant until today. Seems a bit risky for my blood, but I would assume this is an extreme example of what can go wrong. This guy literally chose the wrong time to short a stock that was, in all visible aspects, on the decline.  How often does a Large Company or Individual buy stock on the decline... and send that stock soaring? How often does a stock go up 100% in 24 hours? 600%?  Another example is recently when Oprah bought 10% of Weight Watchers and caused the stock to soar %105 in 24 hours. You would have rued the day you shorted that stock - on that particular day - if you believed enough to ""gamble"" on it going down in price." Let’s turn this round. Now what if the only people willing to own part of company are doing it due to the expectation that they will make money in the short term form the company…. This is a gross simplification as there are a few different ways to do this. The principle overall is the same though. To short a stock, you borrow X shares from a third party and sell them at the current price. You now owe the lender X shares but have the proceeds from the sale. If the share price falls you can buy back those shares at the new lower price, return them to the lender and pocket the difference. The risk comes when the share price goes the other way, you now owe the lender the new value of the shares, so have to find some way to cover the difference. This happened a while back when Porsche made a fortune buying shares in Volkswagen from short sellers, and the price unexpectedly rose. Eh, a corporation owned in part by the person who directed the corporation to file for bankrupcy after the corporation lost a legal challenge, doesn't really mean much.  Corporations exist to protect shareholders for exactly this reason.  Sounds like this Bill Zanker person got hurt by the bankruptcy filing the most not Kiyosaki. In this example, Client A has to buy shares to return them to Client B for his sale (closing Client A's short position).  Client B then sells the shares.  The end result is there are no shares within the brokerage clientele anymore, so Client A can't borrow them anymore.    The broker is just an intermediary, they wouldn't go out and acquire securities on their own for the benefit of a client wanting to short it, as they would be taking on the risk of the opposite position.  This would be in addition to the risk they already take on when allowing people to short sell -- which is that Client A won't have the money to buy the shares it owes to Client B, in which case the broker has to make Client B whole. "It's called ""dilution"". Usually it is done to attract more investors, and yes - the existing share holders will get diluted and their share of ownership shrinks. As a shareholder you can affect the board decisions (depends on your stake of ownership), but usually you'll want to attract more investors to keep the company running, so not much you can do to avoid it. The initial investors/employees in a startup company are almost always diluted out. Look at what happened to Steve Jobs at Apple, as an example." You can apply for a position with any company you like, whether or not you are a shareholder. However, owning shares in a company, even lots of shares in a company, does not entitle you to having them even look at your resume for any job, let alone the CEO position. You generally cannot buy your way into a job.  The hiring team, if they are doing their job correctly, will only hire you if you are qualified for the job, not based on what your investments are. Stockholders get a vote at the shareholders' meeting and a portion of the profits (dividend), and that's about it.  They usually don't even get a discount on products, let alone a job. Of course, if you own a significant percentage of the stock, you can influence the selections to the board of directors.  With enough friends on the board, you could theoretically get yourself in the CEO position that way. A company CAN hold on to money.  This is called retained earnings.  Not all money is due back to the owners (i.e. stockholders), but only the amount that the board of directors chooses to pay back in the form of dividends.  There is a lot more detail around this, but this is the simple answer to your question. "tl;dr:  Prosecutors probably thing they can't meet the ""reasonable doubt"" standard, and the deck is heavily stacked against lawsuits.  The whole running the company into the ground part is legal.  It's stupid, but no different than any bad boss that pits employees against each other.  Just on a much grander scale.  The real estate thing is extremely shady.  However, when you're the boss of a company, It's not considered theft to do business with another company you own.  The truth is Sears is drowning in debt.  The CEO offered an easy out.  They sell the property, and only pay reduced rent.  It also means closing stores is easier, and Sears is on the decline.  So, on its own, it's shady, but not the worst way of getting quick cash.  The fact that the CEO is responsible for that decline is what pushes things into potential legal trouble.  It's essentially a complicated form of theft.  One where if Sears goes bankrupt too early (before 2020 or so), his real estate business can't handle it and burns.  However, these sorts of executive theft are almost never prosecuted.  The best chance would be a shareholder lawsuit, but it would have to be against the entire board for supporting him.  Then you run into the issue that, while the board is ""elected"", the laws governing it allow for tricks that make the Russian election look sterling in comparison.\*  Basically, if a CEO is backed up by the board, and not doing something blatantly illegal, they can probably get away with it.  Board elections tend to be rigged to the point that having a member that cares about the company, and all the minor shareholders is laughable.  \* In addition to how the candidates are chosen, votes are cast, etc..., etc... many companies have several types of shares.  Some of which have no voting power, and some of which count for many times the vote of a normal share."