Issues & Opinions

John Mackey, CEO of Whole Foods Market, has some ’splainin to do. From the San Jose Mercury News, this was the headline:

Whole Deception: CEO of Whole Foods used fake name to hype stock on Yahoo message board

Along with some analysis and outraged opinionating (with which I take no issue), the Merc’s Vindu Goel points to a free WSJ link, so I will too:

Whole Foods Is Hot,
Wild Oats a Dud —
So Said ‘Rahodeb’

Then Again, Yahoo Poster
Was a Whole Foods Staffer,
The CEO to Be Precise

By DAVID KESMODEL and JOHN R. WILKE
July 12, 2007; Page A1

In January 2005, someone using the name “Rahodeb” went online to a Yahoo stock-market forum and posted this opinion: No company would want to buy Wild Oats Markets Inc., a natural-foods grocer, at its price then of about $8 a share.

This all comes to light as a direct result of the Federal Trade Commission’s attempts to derail, on antitrust grounds, the proposed purchase of Wild Oats Markets by Whole Foods. Much ink has been spilled supporting either the company or the FTC, and the arguments tend to revolve around the definition of the relevant market in which the two should be measured for dominance.

I have no opinion on the matter, and don’t frankly care if they get a deal done, remain independent and separate, or both declare Chapter 7 tomorrow.

I do find interesting, however, the fact that the CEO of a non-trivial public company thinks, or thought, that posting anonymously on Yahoo boards was legal, proper, or even marginally sane.

Internet sockpuppets are a disgusting phenomenon, even when financial markets aren’t their targets. Pretense to have support for a stock, a company, or an opinion, lacking an actual instance of support, is offensive. It’s made worse, in the case of Whole Foods, by the fact that for much of the period in which Mackey was sockpuppeting the stock, it had no need of any support, having been a steady gainer up until the end of 2005.

Mr. Mackey declined to be interviewed. But he soon posted on the company Web site, saying that the FTC was quoting Rahodeb “to embarrass both me and Whole Foods.” He also said: “I posted on Yahoo! under a pseudonym because I had fun doing it. Many people post on bulletin boards using pseudonyms.” He said that “I never intended any of those postings to be identified with me.”

Mr. Mackey’s post continued: “The views articulated by rahodeb sometimes represent what I actually believed and sometimes they didn’t. Sometimes I simply played ‘devil’s advocate’ for the sheer fun of arguing. Anyone who knows me realizes that I frequently do this in person, too.”

Let’s see - he’s been the CEO since he founded the company, and was the CEO for the two months that I owned the stock after its IPO, late last century. (I was jammed into the IPO by my broker, because that’s the way things were done in the early 1990s - I didn’t like the stock, don’t particularly like the company, and have minimal tolerance for sanctimonious vegans in any event).

Sometime in the last 27 years, it should have been made clear to him, perhaps by either his general counsel or his yogi, that CEOs of public companies get their “sheer fun” by playing Pebble Beach or Augusta National, or by throwing themselves into philanthropic ventures, or by any number of other things that are both legal and not likely to bring the humiliation associated with letting the public markets know, definitively, that you’re a nincompoop.

Here are just a few examples of other actions he could have taken, all potentially embarrassing to some degree, but which would have been less embarrassing than what he’s done:

• Have his phone number identified on Deborah Palfrey’s call logs
• Have a voicemail rant against his daughter made public
• Throw a lavish birthday party for his wife
• Post on a Yahoo message board under his real name

None of the above would necessarily indicate good temperament, and three of them could exhibit potential for moral or ethical lapses, but none of them is an explicit indication of stupidity.

For about eight years until last August, the company confirms, Mr. Mackey posted numerous messages on Yahoo Finance stock forums as Rahodeb. It’s an anagram of Deborah, Mr. Mackey’s wife’s name. Rahodeb cheered Whole Foods’ financial results, trumpeted his gains on the stock and bashed Wild Oats. Rahodeb even defended Mr. Mackey’s haircut when another user poked fun at a photo in the annual report. “I like Mackey’s haircut,” Rahodeb said. “I think he looks cute!”

What Mackey actually did? Yeah, it’s an indication of stupidity, arrogance, and, as seen above, no small amount of immaturity. Arrogance, the markets can handle. Stupidity and immaturity? Less so. We like to at least believe our corporate titans are smarter than their average counter-person.

The WSJ piece is from the issue to be delivered later this morning, so the market hasn’t yet reacted to his grave mistake. It doesn’t take Fellini to hazard a guess that by this time next week, he’s going to be the ex-CEO of Whole Foods Markets, and the FTC is likely to be no longer needed to watchdog the alleged consumer interest in keeping Wild Oats out of Whole Foods’ clutches.

This looks like a business-mortal error on Mackey’s part. But it should provide good theater, for at least a short time.

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