North Carolina Law Review

University of North Carolina School of Law

160 Ridge Road

Chapel Hill, NC 27514

Insider Trading and Entrepreneurial Action

June 30, 2017

95 N.C. L. Rev. 1507 (2017) 


The core function of entrepreneurs is to challenge incumbents. Henry Manne famously argued that prohibitions on insider trading serve to entrench large, publicly traded corporations. According to Manne, when insider trading is prohibited, large corporations increase compensation levels to compete for executive talent. But even modern compensation levels do not adequately reward entrepreneurial talent because innovations are difficult to value and finding the right person to reward for successful innovation is often impossible to do with confidence. Thus, Manne proposed that executive entrepreneurs within public corporations should be compensated through profits gained from insider trading. This Essay examines Manne’s argument more closely in light of recent developments in entrepreneurship theory and insider trading law and concludes that prohibitions on insider trading can facilitate entrepreneurial action.



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