Great post and thanks for hitting home the best practices in the collaborative eBook. You ask if this investigation will scare-off other execs...well, it should scare off other execs that are considering dubious practices. Sure, I understand it could make them skittish or feel under a watchful eye--but don't you agree that this is one heck of an extreme example for them to hold themselves to?

Do companies do sneaky competitive things? Without question. This one was done in the open to fool...er, uh..."influence" the public--and from a person in a postion that has a responsibility to shareholders. Yeah, I guess I just see this as such an extreme example. But I, too, am "thinking this through." Looking forward to 'hearing' what others think.

From Ben McConnell's blog:

"I'm just as insecure as the next guy, but I'm not the CEO of a publicly traded company and responsible for the livelihoods of 40,000 employees. That's why it's inconceivable that someone who fights off the wolves of Wall Street every quarter would resort to hiding behind an online mask. It may say more about his character than his wordy attempts to shift blame. A true rebel would confront his own worst fears head-on. Honestly."

the rest is at: http://www.churchofthecustomer.com/blog/2007/07/the-hero-has-10.html

What's even more ironic is that Whole Foods stands for "all-natural and healthy" (his actions run counter to natural and authentic, eh?)

David,

I, too, think it's great to hear from top level management, but let’s know that we are.

More was at stake here than what people thought of Whole Foods. If I understood what I read, the company was buying a competitor that Mackey attacked in the blog. While the influence of these attacks on that negotiation may fit the "Buidness [sic] is Buidness [sic]" attitude prevalent today--everything is alright if it isn't illegal--I'm concerned about the ethics of sneaking around in anonymous back doors and using a blog to spread negative news about either a competitor, anyone or anything. I think it’s a blow to the credibility of blogs–-certainly blogs written by anonymous people--as well as to Mackey’s judgement.

Thanks for the comment ck, and for the link to Ben McConnell's post on the subject.

Yes, businesses do far more sneaky and unethical things than sleuth posting, but I am afraid this whole (foods) episode might spook some top people who will opt to remain silent rather than jump into online discussions. That would be shame.

The "all natural" angle occurred to me, too, CK... I guess I assumed that someone leading a company bent on selling "real" food would likewise be equally "real" in character.

That being said, I wonder too if John was motivated more by fear than rotten character...? It seems to me that many execs have a fear of talking directly to consumers -- and of hearing what they might have to say back. Seems John Mackey may be the poster child for a persistent condition called Social Media Terrors.

Jeanne, you are right about credibility. I often say to people, don't believe everything you read online. Since there's little or no editing or vetting process, we as readers of blogs and chat rooms have to be just a little bit skeptical, especially if something is coming from someone we don't know.

The funny thing here is that some people online suspected that the blogger was actually Mackey, so he may not have been fooling many people. Nonetheless, he may have done some damage to the idea of opening up lines of conversation between companies and customers.

David,

As I have commented before, what I find that could be most troubling is the morale of the employees at Wild Oats if Whole Foods buys them out. Let’s suppose that you are one the ex-Wild Oats employee. You just spent years working for a company that you cared for and felt very passionate about its goals and purpose. Now you’ll be working for a CEO that has not only trashed your beloved company for the last 7 years but he makes no apologies about it.

Mackey did say, “Anyone who knows me realizes that I frequently do [play devil’s advocate] in person, too.” But that is the problem. Many of the Wild Oats employees may not know Mackey. Their first taste of his leadership may be one of distrust and trying to find the hidden agendas.

Yes, Ann, it is ironic about being "real."

Maybe what we need to do more of, and eventually the media will follow, is to point out examples of Social Media Success by top executives, to counter that Social Media Terror you described. I know many marketing bloggers do showcase social media activities that seem to be working well.

"The "all natural" angle occurred to me, too, CK... I guess I assumed that someone leading a company bent on selling "real" food would likewise be equally "real" in character."

Well Ann, I guess if you give a man enough rope he'll hang himself. Amazing to me--but just goes to show how important trust/honesty is. Unfortunately many find this out only when they've lost it.

David: Yep, it might spook...or it might hit home a valuable lesson (lest you be penned all over the 'sphere and in the WSJ). I feel for his employees. Oy.

David,

I agree with you that this was a very unfortunate circumstance. As a former marketing manager in one of the divisions of the largest company in the natural foods industry, I know the dynamics and players in this sector well.

Given the corporate climate today, in general, any breath of impropriety and unethical behavior on the part of CEO's is not well tolerated. I wouldn't be surprised if this leads to John Mackey's ouster from Whole Foods. Tragic because he has been a great leader in every other way, except in this instance.

The Whole Foods competitor in question, Wild Oats, has had its share of operational difficulties over the years, and Whole Foods has always been much more dominant. Do I think the Wall St. experts in this sector paid any attention to chat room drivel, driving down WO value? No. However, Wild Oats had problems as I stated, and what exacerbates the current situation is that Whole Foods' bid to buy Wild Oats, currently under FTC review, makes this even more uncomfortable.

As to the issue of authenticity, unfortunately, many companies in many sectors, fail here. And that is one the biggest causes of disconnect between customers and corporate brands.

There are SEC regulations including a "quiet period"when a publicly traded company is buying a company or being bought. And then there's Sarbanes-Oxley, which is supposed to regulate ethical behavior but which doesn't seem to.

Maybe those need changing because it seems to me that more open discussion would be good, not bad.

In any case, I don't think an anonymous blogger or poster in a forum can really fool anyone.

Good point, Bill. This can be very demoralizing, not only for Wild Oats employees, but for Whole Foods people as well. It undermines the level of honesty and integrity they can see in their boss.

If his reaction to this is a cavalier "I often play devil's advocate," he's making it worse for himself. He could have turned this around to his advantage by saying something like, "I felt it's important to talk directly to customers without them couching things they say because I'm the CEO, but I realize that I sometimes went overboard with my good intentions and my wanting my company to be on top." Some sort of mea culpa might help.

"As to the issue of authenticity, unfortunately, many companies in many sectors, fail here. And that is one the biggest causes of disconnect between customers and corporate brands." -- The shame of it is that you are so right, Claire.

B.L. -- Maybe this case will set more specific rules for corporate execs during a SEC-mandated quiet period. I know they can't be talking to the press or to analysts, but I'm not sure that it prevents them from talking directly to customers. I think the limitation would be speaking on topics that go beyond products and services, but on company strategy and plans.

It's been so long since I've done investor relations that I'm not up on the latest rules.

Thanks, both of you, for joining in here.

Yep, Claire is spot-on. The irony? Authenticity gains fans (not just customers but die-hard loyal customers that evangelize and sell for you).

To me, this episode was really just a case of Mackey being very stupid, until you factor in that he was running down a competitor that Whole Foods was trying to buy. Was he purposely posting negative information about Wild Oats in an attempt to drive down the stock's price to make it easier to acquire the company? We can debate how much his or anyone's postings on a Yahoo board would have affected any company's stock price, but if Mackey's INTENTION was to try to drive down Wild Oat's stock price (and what if he was posting negative info that he knew wasn't accurate?), then I can't see how Whole Foods can keep him on as CEO. That just crosses an ethical line that's too wide to discount, IMO.

Anonymity would be useful to someone like Mackey to discuss any number of topics, including those related to his industry... but he certainly should have thought twice before bad-mouthing the competition in this manner.

This is bad form and ethically suspect at least, if not outright wrong.

Mack, and that's where it may go beyond just what's ethical and move into the realm of what's legal.

Interesting debate. Even if this is determined to be an issue of free speech, it'll likely be a while for this debacle to wane.

I can't remember who first said something like this, but a good litmus test is to ask yourself what your grandma would say about your behavior. If she would shake her finger and go "tsk, tsk," don't do it.

John Mackey's behaviour is certainly unethical. I guess it remains to be seen whether it's illegal.

It's a shame that people do things that they know are unethical but legal, when their guideline should be their own ethical barometer. Or as Elaine Fogel says, the grandma test.

Yes, I like that -- the grandma test. Or as some of us would say, the bubbe test. Thanks for checking in Elaine and Tim.

When this story broke late last week, I shook my head in embarrassment and said such in a Brand Autopsy posting. Mackey’s kinky business behavior might not be illegal, but it certainly is perverse. We all get our jollies somewhere. Mackey got his jollies jostling with others for seven years on an online financial message board. Oh my. Dirty, perverse stuff.

Many of you responding to this post are bloggers yourself.

Do you think Mr. Mackey's actions hurt your reputation as folks who promote the benefits of corporate blogging?

The more I think through this, the more I'm reminded of the 40,000 jobs (and health insurance of those employees) that he's responsible for. This was a deceptive act to better the company and was negligent.

Yep, he should be held legally accountable--and he should take the welfare of his employees more seriously.

John and Kevin -- Yes, it's embarrassing for him and his company. It could hurt the credibility of corporate blogs, but as I;'ve said above, I'm also concerned that this episode will act as a deterrant to other CEOs who might consider conversing with customers through blogs and other social media. Mackey may have made it more difficult for thjose of us in p.r. and marketing to convince the CEOs to do it.

CK, I don't know if what Mackey has done is illegal. Simply going online- even disguised as someone else -- probably isn't under free speech rights. And if he showed poor judgement in doing this, which we all seem to agree he did, is it any different than showing poor judgement in any other business decision? It's not at all fair, but what about the CEO of a giant bank who got involved with loans in South America and then when the loans went sour, he kept his job while thousands of tellers and office workers lost theirs. (Chemical Bank NY, before it was bought by Chase.)

Poor judgment always comes with consequences.

For Mackey, consequences happen to be (a) an inquiry by the SEC into his "rahodeb" writings, (b) more bad vibes regarding the possibility of the WFM/OATS merger being approved, (c) embarrassed WFM Team Members (employees), (d) personal embarrassment, (e) potential action from the WFM board of directors, (f) potential lawsuit from shareholders ... and the list goes on.

For other CEOs, the consequences are that more and more of them will feel gun-shy to go public in whatever medium with their opinions regarding the company they manage.

John,

Agreed. Poor judgment on the part of CEOs and upper management has many negative ramifications. In my opinion, Mr. Mackey should step down before he is forced to do so; he should do it with as much grace and dignity as possible. It is the right thing to do under the circumstances.

For all the good stuff they market as a lifestyle and experience, Whole Foods never fails to remind me that "quality" matters more than "price" or "value" in their marketing. It also does come under fire regularly for not abiding by a "union ethic" and outsourcing organic produce from non local-sources (among other charges), so I take the "progressive branding" with a pinch of sea-salt. That said, it's important not to lose sight of what Mackey actually did when he did it.

During antitrust review proceedings there are numerous reasons all parties involved are to keep their mouths shut.

First, bear in mind this was a *legal* proceeding involving federal antitrust review before the Federal Trade Commission staff (it could also have warranted parallel DOJ review had the concerns been great enough). That Mackey chose to circumvent the legal process in place necessary to meet his commercial goals-- regardless of his reason or intentions-- is important.

Second, until any merger is actually approved, all firms involved are still technically competitors. Those competitors each have directors and advisors with obligations to their firms that can be comprised by the release of *any* information in advance of FTC/DOJ antitrust rulings.

Third, competitors seeking mergers also have management, staff, and operations that can be damaged or undermined in the marketplace by the actions of leadership if signals are sent that they are uncooperative, petulant, nervous, antsy, dissing the other firms, or simply don't have faith in the review process itself.

Fourth, while highly unlikely that Mackey faces criminal penalties (FTC can't bring or enforce such against him for this sort of behavior), DOJ *and/or* SEC could still issue fines and penalties not simply against him but *his firm* respectively for tactics that sought to influence the outcome of the review, and for behavior and effects on this and other competitor and the market (i.e. if anyone gained by the release of the postings).

Fourth 1/2, Had the FTC simply not recommended the merger, that would be one thing, but don't forget the FTC is actually *suing* to block Whole Foods' purchase of Wild Oats, stemming from a preliminary injunction hearing in June.

Fifth, He's now given Wild Oats' potential ammunition to call off the deal and *sue* him and Whole Foods. Other competitors in the marketplace with long-held grudges could also use his postings and the information within them to substantiate their charges to derail the merger should DOJ decide to review along separate lines, not to mention settle any number of scores through lawsuits and FTC investigations of unfair trade practices as well. And that's before Congress decides to investigate the "organic food" industry, "blogging in investor communications", etc.

The two firms only have, at best, about what 15-20% of the of the organic food market here? I won't reveal what I suspect the real deal on competition here is, but something strange is indeed afoot.

I've long held a nagging suspicion that Mackey actually wanted to torpedo this deal from the start, only going through the motions as his board as his been pushing it more than he. His need for the "justification" (i.e. "don't take what I say too seriously) in light of the expose, rather than simply saying "I did it, along with his public statements and behavior over the years, makes me even more curious.

Seems to me that the problem with the Internet is that the so-called self-proclaimed expert posting on any site can just be some no nothing with nothing better to do. We are all left to our own devices trying to decide if everything we read is valid or not - a CEO of a major company should NOT add to the confusion by posting blindly on his/her site or anywhere for that matter. I own a small Internet company and I'll always post under my own name and proudly proclaim the name of my company in my posts - whenever they'll let me - it's www.seminarinformation.com by the way.

But I also understand the temptation to anonmously slam the competition especially when the competition has been less than forthright themselves.
The Internet has made us face ourselves as human beings - just how far will we go or how unethical are we willing to be - especially if there's little chance we'll get caught.

I'm disappointed that Mackey didn't identify himself. With Whole Foods being seen as a leading, "fast" company year in,year out, you would think he would embrace being openly involved in social media, and also realize that being sneaky won't produce much good, but it can definitely create some bad stuff.

However, I will be extremely irritated if any legal actions take place. He did nothing wrong - he just didn't say who he was. And on the Internet, no less. Like that never happens.

I have a confession to make, people. Although I go by the name "Tom," I am actually Bill Gates, deceptively lurking and posting in the forum flippantly requesting high quality, pithy responses to bogus marketing issues just to keep marketing folks tied up with the hope that they will not work for my competition.

I am deeply sorry, and I plan to rent the island of Maui to do a press conference.

repentant,
Bill

Wow, I step away for a few hours for a meeting and look what happens.

I agree, John, that this will possibly make other CEOs gun-shy about going public via any medium.

Ryan, thanks for the rundown on the legal issues in play. Are you sure you don't want to share your suspicions re. the competition. Come on, you're among friends.

Hey Tom, what's the deal with Vista?

We don't have all the 20 million+ documents that were collected during the review, so it's tough to know what's going on here, but technically, there is *no* natural and organic food market" that's national in scope particular to these stores , I have to agree with Mackey.

Think about it: the larger grocery stores with more reach and presence (and crappier, though cheaper, produce) technically have a greater foothold on the organic market-- thanks Kroger, Albertsons, Safeway, and Wal-Mart (Tesco in the UK?). Then the farmers markets and local health food stores....

Of all the competitors, Mackey seems to specifically have name checked less than a handful-- Wegman's and Trader Joe's included (don't know about Balducci's). Both are *way* more formidable than he makes Wild Oats to be. Unlike Wild Oats, any number of competitors are actually profitable (which Whole Foods is as well, though price per share has been falling as of late).

He also doesn't bother to bash them in the same way he's trashed Wild Oats-- in fact, he's largely not bothered with them for years. He also does this, while glorifying himself and Whole Foods. Yet, the kicker for me is that he also seeks to demand access to the confidential information gathered by the FTC during the review on his competitors as well. Hmm...

Press and public have focused too much on the stores, hence what I've been wondering in the information not yet released. Consider too that Whole Foods doesn't just compete in terms of stores, but also as a food distributor, with the power to dominate and set pricing on its ear despite it's relatively small share.

Suspicion: There's some funky board politics going on and Whole Foods (or at least Mackey-- judging by his libertarian streak, probably without his board's consent or knowledge) was trying to set itself up for a better merger offer with a larger-- albeit more conventional-- grocery store chain that's struggling- or one of their major food producers.

Would be curious to see the level of trading activity taking place over the past and next several weeks to see what's what...

People who anonymously trash companies on Yahoo Finance message boards are invariably trying to drive down a stock price. Forgive me for being so blunt, but these people are punks. Not only is it cowardly, but it is incredibly naive to imagine that such a forum and such remarks would create real movement in the price.

Whether it is illegal or not is beside the point. It clearly shows he is incompetent and has no character.

Let's not confuse the petty actions of this person with the larger questions of the value of a CEO blogging or a company acting with more transparency and openness.

It speaks volumes about the coziness of boards that the Whole Foods directors are forming a committee to "study" what happened and not simply firing this chump.

Charles ... it is kinda hard to "fire" the co-founder of the company. Stripping Mackey of his CEO title would seem appropriate given this mess. He would still be chairmain of the company he co-founded and has lead for 35+ years..

Interesting theory Ryan. Nothing would surprise me in the world of business & finance.

"It speaks volumes about the coziness of boards that the Whole Foods directors are forming a committee to "study" what happened and not simply firing this chump."

I agree with Charles. And it does speak volumes. It's like yet another gov't sub-committee.

I think there should definitely be some action by the company, since he has put it at risk and hurt Whole Foods' credibility, even if temporarily. A meesage needs to be sent that this is not good behavior for a top executive

I'm surprised that so many people think Mackey did nothing wrong. By misrepresenting himself, he took away an essential piece of information that would enable the reader to evaluate the value of his comments. (He attempted to manipulate the reader. Isn't that the same goal of out-and-out lying?)

It's certainly true that you can't believe what you read on the Internet, but shouldn't our goal be that what appears on the Internet can be believed?

Mimi, until or unless there's some vetting process in place, which would in some ways defeat the idea of blogs and user-created media, there's no real way to be sure what we read online is accurate. It comes down to each of us making our own judgement. Mackey has certainly blown not only his own credibility, but to a degree that of his company as well.

Legalities aside, he lost a significant amount of trust in his customers, employees and others looking inward from the outside. Sure, slap him on the wrist, but he's already slapped himself and his company by being uncovered.

I'm knocking myself for not putting this together sooner. I still stand by my earlier suspicious as a parallel thought, but I give credit to CK & Ann & others for actually said something earlier that had deeper resonance than both may have realized. Their comments jogged my memory regarding earlier activities in this sphere that didn't make sense until a little while ago. Bear with a little digression...

The FTC has taken a beating not simply for block the merger, but for the reason behind the merger. They're not blocking it on purely antitrust grounds, but because the FTC has identified a "prestige natural organic " market-- where there is none by current federal regulation under the FTC's authority.

Recall since 1997 the nasty fights the mere word "organic" has unleashed as USDA attempted to weaken the standard through inclusion of genetic modified foods, irradiation techniques, and food produced with toxic sludge, banned pesticides, antibiotics, and tainted feeds. Those had the support of consumers and the "organics industry", though it was not called such.

Then recall the brutal fight, around 2002, over the "organic" standard. Bolstered by consumer support, the National Organic Standards Board (independent federal advisory standards setting group) drafted guidelines for USDA to implement as a "seal of approval", not a "mandate", to basically ensure no synthetic items in purely "organic " foods, and a limited amount in the "made with organic" foods category.

Food producers however sought protection from what they considered a regulatory burden while a court case sought to to resolve whether USDA regulations covering organic foods ran counter to the spirit of federal organic food protection laws. Meanwhile, one could see competing factions with not-coincidentally similar sounding names, particularly the Organic Consumers Association (advocacy network of organic consumers) and Organic Trade Association (more mainstream food producers of organic products) .

Skip ahead to 2005, and a court ruling siding with consumers and NOSB against the USDA and the "organic industry" (still undefined). OTA pushed NOSB to solidify guidelines that had previously allowed the inclusion of nearly 40 additives, chemicals, and synthetic ingredients, so that its larger retail grocery and food producer members could appear to be socially responsible while meeting growing consumer demand.

In effect, then-current practice meant any product could be certified as organic as long as a minimum of 95% of the ingredients were such. But a legal challenge cast doubt on whether relabeling to more accurately state, "Made with Organic Ingredients" was in order. Further, the rule change would have allowed for further additives to be included on a continuous basis without input, comment, or feedback from the public or the NOSB.

This was seen by consumers groups as a direct assault on public accountability with respect to an independent federal standards setting body by industrial agriculture, organic processor, and natural food chain interests working directly or indirectly with a federal department (USDA).

To make things more interesting: in fall of 2005, a mysterious set of language appeared out of "nowhere", attaching itself to an unrelated piece of spending legislation (a/k/a/ Agriculture Appropriations) Congress had nearly finished for the 2006 fiscal year. In effect, the language (a/k/a "a rider") would have lowered the organic standards even furthered by approving 100s of artificial ingredients and processing aids, as well as limiting public discussion and comment. In addition, the rider would not only have limited future public participation in NOSB's activities, but curtailed NOSB's own authority to monitor and the standard it was mandated to do.

So who was responsible for the insertion? OTA. Which interests did OTA proudly include? Aurora, Dean Foods/Horizon, Dole, General Mills, Kraft, Smucker, and General Mills.. and Whole Foods Market and Wild Oats.

My guess: the FTC really rankled OTA's loudest voice "truly organic" voice by daring to actually label and define their interests. If they actually are defined, then they actually run the risk of being regulated and held to all the standards, scrutiny, and responsibilities that come with it. That would be consistent with Mackey's burning to desire to get his hands on the competitor info compiled by the feds he knows he can't ask for (among other telling signs others have pointed to).

Pay special attention to other information as it gets released and note the time period. Also note, again, any information on stock trades-- as well as spikes in protest activity or delays regarding development of new stores in the Trader Joe's/Wegman's chain compared to Wild Oats in the same time period. That's how you now something's afoot.

Mackey still did something wrong, not merely bad. I don't believe he intended to get caught. There are severe ripples that will occur (I'm betting, not hoping, but unsure what).

"Pluralitas non est ponenda sine neccesitate", indeed. I simply forgot to shave with Ockham's razor beforehand.

Okay, I'm leaving this Mackey alone for good now!

Thanks for checking in on this Ryan. An interesting theory.

Well, it's now 10 months since the last post on this blog, with Wild Oats acquired, and guess what? WholeFoods has become more brazen and dishonest as a corporation; for that I can vouch from my own personal experience.

I was one of those who played a part 30+ years ago in the formulation of Massachusetts unit price labelling regulations (202 CMR 5.00), which require large MA grocery stores to provide clear unit price information signs or labels (i.e. dollars and cents per pound, etc.) on or near most products displayed for sale to customers. Consequently, when I see violations, I usually try to speak to store management and offer help with compliance - free. Sometimes this gets good results.

On to WholeFoods in my town: lots and lots of unit price violations, more than ever, correlating with the lawless direction of our federal leaders. Store personnel are programmed to tell me anything, whatever it takes to shoo me off. Certainly don't bother with fixing the violations. "We're exempt"; "we're in compliance"; "the rules don't apply to us"; "we never heard of the rules"; "the rules have changed"; etc. etc. Occasionally, "we're working on it" (which has always been a lie).

Go up the chain of command, that's when you learn who has integrity and who doesn't. Local store manager John Forziati: in the bag; calls the police to order me never to come back. Treat me as a pariah. Northeast HQ: already vetoed a compliance effort long-sought by its IT chief.

I can only conclude that WholeFoods' strategy is to cheat the rules just as hard as they can.