Whole Foods’ chatty CEO: more a looney problem than a legal problem
The Wall Street Journal’s great story about Whole Foods (WFMI) CEO John Mackey’s pseudonymous postings on stock-market chat forums — more than 100 posts from 1999 to August 2006 — naturally has everyone (including my editors) wondering: what exactly are the legal issues here?
I called some securities law experts, but they all seemed to think that the problem was a bit broader than that. It’s a control issue, they explained. The CEO is disseminating information that hasn’t been reviewed by either the general counsel or the board. If his comments move the market, he could be engaging in stock manipulation. If anything he says is materially misleading, he’s violating Section 10B of the Securities Exchange Act. If any material nonpublic information slips out, he’s violating Regulation FD, which forbids selective disclosures. If he’s ragging on a competitor’s CEO, he could inadvertently say something defamatory. If there are confidentiality agreements in place, he could be violating them.
“This episode raises more questions about his sanity than his criminality,” says Columbia Law School professor Jack Coffee. “He does not appear to have made any materially false statement . . . and he did not release material information. The real issue for the future is what his board should do. Can it have confidence in someone with judgment this poor?”
Mackey’s own account of what he did and why — “I posted on Yahoo under a pseudonym because I had fun doing it” — is contained in an FAQ on the Whole Foods site here.
One pretty good example of a Mackey chat-room post that might not have made it through a legal vetting process is the one found on page 4 of the Federal Trade Commission’s June 2007 brief seeking to enjoin Whole Foods’s $565 milion acquisition of competitor Wild Oats (OATS). In that case the FTC is trying to prove that the merger would “substantially tend to lessen competition” in violation of the antitrust laws. In a March 2006 chat-room post Mackey wrote, “Whole Foods says they will open 25 stores in OATS territories in the next 2 years. . . . . The writing is on the wall. . . . Whole Foods is systematically destroying their viability as a business — market by market, city by city.”
Of course, Mackey appears to have been so disarmingly candid even in his fully attributed statements in official settings, that his chat-room logorrhea might not end up making any difference. According to the FTC brief, he told his board of directors (in an evidently recorded or transcribed setting): “By buying them we will . . . eliminate forever the possibility of Kroger (KR), Super Value, or Safeway (SWY) using their brand equity to launch a competing national natural/organic food chain to rival us. . . . [Wild Oats] is the only existing company that has the brand and number of stores to be a meaningful springboard for another player to get in this space. Eliminating them means eliminating this threat forever, or almost forever.” I’ll bet a lot of antitrust regulators go their entire careers without being handed a smoking gun as hot as that one.
If you want to look at the Rahodeb emails yourself (that was Mackey’s nom de keyboard; it’s an anagram of his wife’s name, “Deborah”), I’ve done a casual search of the Yahoo Finance Message Boards and found about 151 of them, available here. It looks from context, though, like there would have been more if Yahoo’s archives went back further. [CORRECTION: Commenter KatLawson points out that there are at least 1,394 Rahodeb posts, and provides the appropriate search link.]
Though it’s hard for a reporter — or an antitrust regulator! — not to love a CEO as forthcoming as Mackey, we’ll have to see if Whole Foods’ board finds the trait as endearing.
I read somewhere that this man decreased his salary to only $1.00. If this is true MORE Ceo’s should follow his lead and charactor! Whole foods, while they might not be the best organic foods available; at least they are trying to bring the organic ethics to the masses, more than I can say about Walmart & ms ceo hillary clinton!
Haha, this is hilarious! Way to go Mackey! My real question is: how may people do NOT do this? This is the beauty of the internet: anonymity. Don’t you think thousands of people in politics, business, and all other public fields don’t also do that? They’d be stupid not to do so. They have anonymous blogs, they go anonymously on forums, they write anonymous comments on other blogs, and by doing so, they influence other readers and writers and politicians and businessmen and housewives! I mean, how do you know I’m not George Bush?
ARK might be Mackey but he’s entirely right, the FTC should not even open this pandora box!
(And no, I’m not Mackey, sorry to disappoint you, but I might be George Bush. Then I guess it’d be illegal for me to write here “I love the USA”…).
This is the sort of thing that not only wrecks careers, it wrecks companies…and for what? Absolutely nobody with an ounce of common sense takes Yahoo boards seriously? That Mackey would play there says all I need to know about his judgement. If he made a mistake this elementary, he will make others. I know what I’d do if I was on the board
I say let the guy vent and play his blog game of ‘I’m coming to get ya competition!’ As long as the meat is organically raised and I can find food fit for my delicate body- I’m still going to only shop at Whole Foods. Keep it simple and keep a few outspoken hippies around- it is just as much a part of the stores success as the beautiful and natural display of products. I’ve been a Chicago customer for 15 years.
“Chat-room post”? Being schooled on basic research by a commenter? Thank God for the impeccably informed trad journos…
Roger, your mistake with the yahoo search stems from placing the author name in both the search string and author name (placed just in the author name you get more than a 1000 hits). This is definitely not the only case of pseudo-CEO, the popular boards are on fire with this kind of stuff… I’ve read several posts on instantbull’s board aggregator - from yahoo and other boards
I hope that Whole Foods DOES cease to exist - Mackey can go wherever, I think that Whole Foods itself is just such an organic hype-house. WOO HOOO let’s pay $10 for oatmeal!!!! I don’t buy the hype, Chatty Mackey or not…
Mackey is a rare human. A savant of sorts. Excelling in anything in which he focuses. Be it sophistry, running a business and seeing it fruit and multiply and beyond, backgammon. Tremendously competitive. Refrain from challenging him to game of Ping Pong. Unless you have the focus of Federer. I’ve seen the arguing for the sake of the debate and can easily see it translating to blogging.
Loony? doubtful
Driven? undeniable
Do you think that just because he’s CEO that he shouldn’t want to, or can’t, post on a public message board the way everyone else has a right to?
I’m not sure why that makes him “whackey” in your or anyone elses eyes. If anything, he exhibited VERY normal behavior in wanting to discuss and defend his company and was afforded that opportunity in what he thought was a anonymous way. Whats VERY telling is the fact that now people have the benefit of hindsight and even with that, your sources say this..
“says Columbia Law School professor Jack Coffee. “He does not appear to have made any materially false statement . . . and he did not release material information.”
That in itself speaks highly of his true character I think.
Uh, more than 100 posts?
—————————–
http://online.wsj.com/article/SB118418782959963745.html?mod=rss_whats_news_us
“rahodeb” Yahoo Message Board posts: http://tinyurl.com/2g782n
According to the Yahoo Search — Mackey made 1,394 entries, from 13-Jan-99 04:16 pm until his sign-off on 12-Aug-06 06:19 pm.
The board members had him pegged YEARS ago… why not the SEC?
He’s been ridiculing people “shorting” his stocks while boosting his market trends. He boasts about shutting out the co-ops & just seems like an overall slime-ball. I never read any type of “insider information”, but posting “inklings” about how the next quarter will turn out, prior to that date, surely skirts an illegal activity.
Oh, well — they have lost two customers — never to step foot in their stores again! And, I told them so. Just another company in my ever-growing list of boycotts!
My prediction — he’s going to jail & their stocks are going to plummet!
Anagram -
I’ve yet to see a Wild Oats that is not filled with angry, unmotivated employees.
And if you’ve ever had to deal with the owners of Wild Oats, you’d know it too is not a cup of tea.
To ARK and RC–
Knock it off, Mackey. I know all your pseudonyms.
John Mackey IS a raving pyschopath .
Assuming the deal actually does go through, you’re going to see a very large number of angry, unmotivated Wild Oats employees working for Whole Foods.
John Mackey IS Whole Foods. Take him away and the Company will not thrive as in the past.
I guess FTC has nothing better to do, then trying to dig up dirt from blogs a CEO posts under a pseudonym. 99% of all bloggers use pseudonyms. Reviewing the FAQ at Wholefoods website, I have to agree with John Mackey; buyouts are done to mostly to eliminate competition.
Is Mackey a bit wackey, maybe, but we all have skeletons in our closets.
Let the FTC look at ‘big oil’ and check their blogs, that might turn up something more sensational!
After selling my fortunately paltry 200 shares at 9:31 this morning, I belatedly checked the list of directors. I was shocked at the quality of the Board. This company needs a new independent, qualified Board and a new CEO. Relying on this Board to address Mackey’s sanity issues is foolhardy.
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The head of the company is a BS artist. I’ve always thought the culture of Whole Foods was one of duplicity. The products that crossover into chains like Kroger’s are always overpriced in WF. Many of the “wholesome” products are just nonsense like the store’s greenwashing.