August 2007 Ethics Dunces

Whole Foods Market Inc. Founder John Mackey

Let's have a show of hands: Pretend you are the CEO and Chairman of the Board of a large corporation in a competitive market. Someone suggests you post on the Yahoo stock forum a series of anonymous messages praising your own company and tearing down the opposition. Would any ethical bells go off?

If you are John Mackey, the founder and leader of Whole Foods Market Inc., your hand is by your side. Using the pseudonym "Rahodeb," an anagram of Deborah, his wife's name, he routinely posted positive comments about Whole Foods' financial earnings to the popular investor website, and regularly bashed what the Federal Trade Commission says is his company's #1 competitor, Wild Oats Markets Inc.

Oh…Whole Foods just announced in July that it is buying Wild Oats.

If this smells unethical to you, go to the head of the class. Obviously, positive comments about the earning potential of a company have no credibility whatsoever when they issue from that company's head honcho, just as negative comments about a company's competition would be dismissed if they came from the same source. So Mackey misrepresented his true identity and intentionally deceived his readers--- 1,100 times over seven years. This isn't simply anonymous posting; this is called lying. He even flattered himself on the site, contrasting his skills as a manger with his Wild Oats counterpart, and, less consequentially, saying as "Rahodeb" that John Mackey was "cute." Actually, he often managed to complement himself while denigrating Wild Oats, as in this post on April 28, 2000: "You must not patronize any of WFMI's stores [WFMI is Wild Oats' stock symbol]…Tatoos, piercings, unusual dress and interesting haircuts are everywhere in the stores. In comparison, Mackey looks like a model for Brooks Brothers!"

Mackey, no shrinking violet he, is not exactly contrite. "I posted on Yahoo! under a pseudonym because I had fun doing it," he has stated. "I never intended any of those postings to be identified with me." Well, obviously! If the whole point was to cast credible but untraceable aspersions on his competition and praise himself---obviously what many CEOs would consider great "fun"---having such comments identified with the one being praised would undermine the effort. Mackey used his expertise and inside knowledge to develop credibility among those who regularly perused the Yahoo site, and then used that credibility dishonestly for his own benefit by not disclosing a critical bias: he founded and ran the company he was praising, and the company he was trashing was a competitor.

Did this classic example of why anonymous web postings are unethical actually do much to help Whole Foods or hurt Wild Oats? Probably not. Does it show that the ethical instincts of the top executive at Whole Foods are seriously flawed? Absolutely. Should that worry the FTC, the financial markets, and Whole Foods' board, management, employees and stockholders?





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