CEOS DREADING MARGIN CALLS

WHAT do J.K. Rowling and Jamie Lynn Spears have in common?

Well, for one thing, their fortunes are tied to companies (Scholastic Corporation and Viacom respectively) whose chairmen have been playing with matches in their corner offices of late.

Of course no real fires have been set, but investors have nonetheless been caught up in a conflagration. Sumner Redstone of Viacom and Richard Robinson of Scholastic were both forced to sell huge stakes in their companies in recent days, to meet margin calls from their banks.

As the shares hit the market in waves, the stocks gapped down at CBS (Redstone was dumping that as well) and Viacom to the tune of 20 percent. Shares of Scholastic cascaded lower, too.

And it’s not just Viacom and Scholastic. As the market has headed south, dozens of CEOs from Chesapeake Energy to Williams-Sonoma to Boston Scientific have been hearing those dreaded two words – margin call – as small investors begin to learn that overpaid executives have been living as much on the edge as millions of sub-prime borrowers.

Worse still, in most cases shareholders didn’t find out about the forced sales until after the selling climax was over.

Apparently the SEC, which has enjoyed playing red light, green light with short sellers since July, doesn’t think shareholders need to know whether the CEOs of the companies they own really own as many shares as they pretend to. If that’s not material information, I don’t know what is – especially since so-called “insider buying” has become a favorite metric in evaluating stocks.

But that’s just part of the equation. Not only do forced sales by cash-strapped CEOs put shareholders in harm’s way, they also raise concerns about the risk management at the companies these executives operate.

If billionaire CEOs like Redstone and Aubrey McClendon of Chesapeake Energy can’t manage their own finances, taking on personal debt during the biggest credit meltdown in our lifetime, what does that say about the companies they run?

With so much for investors to worry about this autumn it’s a shame that insider selling under duress must be added to the list-but it’s a new fact of life in these volatile markets.

Corporate boards of directors could go a long way toward restoring investor confidence by disclosing which executives own their shares outright, and which have borrowed heavily to do so, misleading unsuspecting shareholders in the process.

TERRY KEENANis anchor of Cashin’ In, an investing program that appears on Fox News Channel on Saturday mornings at 11:30. E-mail terry.keenan@foxnews.com.