August 4, 2007

Is Whole Foods CEO in Hot Seat?

I was interviewed recently for a news analysis piece in the Boulder Daily Camera on the ethics of Whole Foods CEO John Mackey's use of a pseudonym to comment on Whole Foods and Wild Oats message boards on and off for seven years:

Mackey's actions come off as unethical, but not to an unjust degree, said Julian Friedland, a professor of business ethics at CU's Leeds School of Business.

"(It's) unethical in a sense that it's dangerous," Friedland said. "It's a moral hazard. You're putting yourself at risk to do something that is very damaging."

If one is in a hot-headed frame of mind, he said, that person easily could slip up and divulge something they shouldn't.

One advantage for Mackey is that much like Apple's Steve Jobs, he can do no wrong in the eyes of some shareholders, Friedland said. Whole Foods is a bit of a "cult stock" whose enthusiasts view Mackey and applaud him for being a bit of a "swashbuckler," Friedland said.

"I see this blowing over unless they can dig up more stuff that shows in these postings that he's possibly broken the law," Friedland said.I also said this behavior runs the risk of revealing character flaws and lack of judgment since his identity could come out later (as it now has) after he's made petty and unfounded claims (as he has) attacking Wild Oats and even defending his new haircut as "cute."

At the time of the interview I also pointed out the disturbing fact that Mackey felt no need to apologize. Since then, he has given the following rather perfunctory statement:

I sincerely apologize to all Whole Foods Market stakeholders for my error in judgment in anonymously participating on online financial message boards. I am very sorry, and I ask our stakeholders to please forgive me.

It's nice to see he finally apologized. Doing so holds him to a higher standard, reducing the likelihood of him doing something like this again. As I said, his postings don't at this point seem to be an issue of injustice, barring some future revelation of his disclosing details tantamount to insider trading. Still, as he admits, it indicates poor judgment. And the fact that he only made what seems to be a rather half-hearted apology weeks after denying any wrongdoing does little to reassure investors that he feels genuine remorse.