What's Rotten at Whole Foods

(page 2 of 2)

His effort to persuade other investors that Wild Oats wasn't worth $8 a share, but instead less than $5 a share, was certainly disingenuous. Not long thereafter, Mackey's company bid the equivalent of $18.50 a share for the rival retailer. Regardless of the legality of his comments, they hardly enhance the likelihood of closing the acquisition, which has already drawn opposition from federal authorities.

He Said, He Said

There is no dispute that he selectively revealed his identity when several fellow bloggers suspected Mackey's true identity. For example, on Apr. 12, 2006, he confessed, "Surgeon General and Boston Cowboy—you were both right about my true identity all along. Congratulations on your cleverness." Perhaps his defense of the firm's leadership or knowledge of detailed performance trend data betrayed his disguise.

On top of this, he appears to have shared information in his Web posts that was not available to the general public. Last year, at the annual shareholder meeting, he publicly announced the company would reach $12 billion in sales by 2010, doubling its sales over five years. Then a week later on the Web, writing under his pen name, Mackey said that: "The upgraded prediction of $12 billion is most likely conservative," and "won't surprise me if the number ends up close to $14 billion in 5 years." In fact, that same month Mackey pseudonymously predicted that "operating cash flow for 2006 will be up at least another 20% just as it is every year."

Finally, his best defense is that some of his confidential musings were not truthful. "The views articulated by Rahodeb sometimes represented what I actually believe and sometimes didn't…."

Standards Issue

It's hardly surprising that the anonymous posts of this granola-eating street fighter have triggered an informal investigation by the Securities & Exchange Commission. What is surprising is that the board of Whole Foods has so far said that it has no intention of meeting to discuss Mackey's conduct. The board should investigate the situation, even if just to protect itself against legal action by shareholders. The revelations of Mackey's Web posts come after the value of Whole Foods' stock has been cut in half from its peak 18 months ago. (Editor's note: On July 17, after this story was published, Whole Foods' directors put out a public statement that they would in fact investigate the postings by their CEO.)

Fair is fair, whether the issue is trade or corporate management. Shouldn't Mackey be held to the same standards as any other Whole Foods employee? Would another employee be able to avoid reprimand or perhaps even termination for such violations of the company's culture and values? So much for leading by example.

Jeffrey Sonnenfeld is senior associate dean and the Lester Crown Professor of Management Practice at the Yale School of Management. His latest best-selling book is Firing Back: How Great Leaders Rebound After Career Disasters (Harvard Business School Press).