WHEREAS criticism of chief executive officers can cause downward pressure on the price of related equities;

WHEREAS the increase in equity prices is of vital importance to the economic welfare of the United States;

Therefore, the purpose of this section is to protect chief executive officers from undue criticism by any natural person or entity.

Freedom of speech is a qualified freedom. It is not absolute. For instance, it has long been established that free expression does not permit a citizen to yell "Fire!" in a crowded theater when there is no fire. The reason is simple: Words have the potential to cause mass panics, and mass panics can harm our citizens.

That's why we at The Motley Fool stand strongly in favor of Section 7 of H.R. 401, the P.A.T.R.I.O.T.I.C. provision. Markets often behave exactly like the crowds in theaters, and when someone yells "Fire!" the devastation can be just as real, in economic terms. Even in the event that there is a real fire, there are better alternatives than expression that results in panic. A quiet, measured distribution of information is preferable to a shout, for what good is a warning if people escape the flames only to be trampled on their way out the door?

That's why Article (3) of Section 7 is of such vital importance. It establishes a new standard for criticism of CEOs and their corporations. Insofar as a CEO believes he, or his company, has been defamed by any natural person or entity, truth is no longer a universal defense against such defaming expression. The courts may now allow damages against those who criticize CEOs in a fashion which "is unduly harsh, neglects to accentuate the positive, or is likely to cause financial loss to the CEO, corporation, or its stockholders, whether such criticism is delivered by the press, a natural person, or other entity."

Consider the case of former Home Depot (NYSE:HD) CEO Bob Nardelli. Despite years of double-digit growth, Nardelli was forced out following a media frenzy regarding something as inconsequential as his conduct at a board meeting, where he refused to accept further ties between his stock compensation and returns to shareholders. This issue would have gone nowhere had the press not spilled barrels of ink on it. A minor disagreement was overblown to such an extent that Mr. Nardelli was soon after deprived of his livelihood, all because the press couldn't stop its fanatical pursuit of corporate gossip. Had Nardelli been able to muzzle his critics, he might still be at Home Depot, piloting it to yet more double-digit gains. Instead, shareholders now face an uncertain future.

As Fool co-founder Tom Gardner put it, "We've seen firsthand the damage that can be done when certain self-proclaimed 'analysts' or 'journalists' take their freedom of speech under the so-called 'First Amendment' too far. We salute the House for realizing that the truth is only supreme insofar as it helps people. Expression needs to be balanced against discretion in order to help every citizen of this great country reach his or her financial goals."

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Continue to our commentary on the next section of H.R. 401!

See Elgin Clay, our lobbyist in Washington, discuss Section 7 of H.R. 401.