The chairman (and founder) and the lead independent director of Green Mountain Coffee Roaster (GMCR) both have been removed from their leadership positions as a result of margin call sales of company stock last Friday that were “inconsistent with” the company’s insider trading policy, GMCR announced yesterday. According to the company’s press release, Mr. Robert P. Stiller no longer serves as Chairman of the Board and Mr. William D. Davis no longer serves as independent lead director because they had margin call-related stock sales totaling 5.548 million shares. These forced sales were related to margin loans, which were secured by pledges of Mr. Stiller’s and Mr. Davis’ GMCR stock and triggered by recent GMCR stock price declines (the stock dropped almost 50% after the company released quarterly results and lowered its fiscal year forecast). The sales occurred at a time when the trading window in GMCR stock was closed under the company’s internal trading policy. Also, it was discovered that Mr. Davis pledged shares after the internal trading policy had been amended to prohibit pledges of company stock (other existing pledges were grandfathered).
These actions serve as a reminder that public companies should periodically review their insider trading policies to ensure that they are current and that management and others subject to the policies understand their operation. We will address this topic further in the next issue of Up to Date.