Friday, May 29, 2015
China is in the midst of a stock bubble, and there is rising fear of the consequences when it bursts. Millions of Chinese might find their savings disappear. At least one board of directors has cautioned investors against speculation. This raises a question. What duty, if any, does a board or a CEO have to dampen irrational exuberance? Companies will release information when there are unusual moves in their stock price to let the markets know that nothing has changed. But, should a chairman of the board and/or a CEO publicly caution investors that they have bid a company's shares too high? It shows that a company is watching out for the investing public and concerned that they avoid getting hurt in a price correction. One can make a case for and against speaking out, particularly if the stock buyers are speculators seeking to make a quick buck. This is when the investor relations department earns its pay.