Whole Foods CEO’s online chats put his integrity in question
John Mackey's antics in a Web chatroom could cost him his job
NEW YORK » There is some irony in the final posting Whole Foods Market Inc. CEO John Mackey made under a pseudonym to a Web message board last August.
"Congratulations to hubris and goodbye," its title read.
It was meant to be a signoff to Mackey's eight years of writing under the name "rahodeb," and his acknowledgment that he lost a bet with another chatter with the screen name "hubris12000" over the company's earnings and stock performance.
Today, it reads another way. Hubris, or excessive pride, by definition may turn out to be Mackey's fatal flaw. His arrogant and unethical chatroom antics, where he trashed the competition and touted management, already have damaged his reputation, and it could cost him his job.
This isn't just a case of an executive breaking from the overplayed corporate script and getting caught. Mackey went well beyond that with his Internet postings because he didn't disclose he was the company's CEO.
Any CEO who catches the chat-room bug should take note of how this plays out. In a matter of weeks, the talk about Mackey has shifted: He was the visionary entrepreneur who built the Austin, Texas-based natural foods grocer into an industry powerhouse; now he's being called sneaky and egotistical.
Mackey's chats, which went from 1999 through 2006, probably would have stayed unknown had the Federal Trade Commission not been trying to block Whole Foods' proposed $565 million takeover of Wild Oats Markets Inc. on the grounds that it would violate antitrust laws by raising prices and reducing competition.
A lawsuit filed by the government not only revealed some controversial internal e-mails that Mackey had sent to the board, it also gave him up as a regular on Yahoo Finance's Whole Foods message boards.
Under the screen name "rahodeb" -- a play on Deborah, his wife's name -- Mackey chimed in periodically with posts dealing with everything from Whole Foods' earnings to his views on corporate governance. There were one-liners, and long, detailed remarks; he was inquisitive as well as defensive in his comments.
The company declined to say when it discovered Mackey was making such postings, and wouldn't comment beyond a statement earlier this week that the board and the Securities and Exchange Commission were investigating his postings.
It isn't clear whether Mackey's comments ultimately violated any laws. But that's not the point. When a CEO poses as someone else, talking at length about the company, its competitors and even its shareholders, it is time to question whether this executive can be trusted.
That's the way James McRitchie sees it. He owns Whole Foods stock and also happens to run a popular corporate governance Web site, www.corpgov.net. He was unknowingly on the receiving end of a rant from Mackey in March 2006.
It stemmed from a comment that McRitchie posted on the Yahoo message board after the Whole Foods' shareholder meeting, where the company did not allow investors whose proposals were being voted on to make a brief presentation. At that meeting, Mackey had said that such restrictions were in place to avoid a "circus" and deemed shareholder comments a "waste of time."
McRitchie, in the chat room, noted that the company's tactics had been met with criticism among socially responsible investment funds and governance groups. Mackey, under his pseudonym, fired back.
"If you don't like the way Whole Foods management operates the business then sell your stock or buy a controlling interest in the company and throw management out," he wrote on March 13, 2006.
Fast-forward to this week, when this columnist let McRitchie know that he had tangled with Mackey online.
"This allowed him to go out and be a protagonist, and he could be less nice and polite than the CEO had to be," McRitchie said. "Maybe that has appeal, but not to me."
Investors, for now, have been very forgiving. The stock has been stable, and Wall Street analysts continue to support Mackey.
"The CEO's actions lack judgment, in our view, but we consider them immaterial. It has been the CEO's passion for the business that has made the company successful," JPMorgan Chase & Co. analyst Stephen C. Chick said.
Laura Rittenhouse, an ex-investment banker who now runs a consulting firm that tracks candor among CEOs by carefully reading their annual letters to shareholders, isn't surprised by what has been going on. She found Mackey's 2006 letter in the company's annual report was littered with contradictions, claims that aren't backed up and a preoccupation with stock price over earnings growth.
Her studies show that CEOs who rank high in candid communication -- avoid jargon, balance hubris and offer engaging and detailed strategic perspectives -- deliver superior performance.