Free Speech or Public Relations Manipulation

QUESTION
1. Under what circumstances should company executives share their thoughts in various online forums? Is it ever appropriate for them to do so under an alias?
DISCUSSION CASE
Whole Foods’ CEO—Free Speech or Public Relations Manipulation?
From 1999 to 2006, John Mackey, CEO of Whole Foods Market, posted numerous messages on Yahoo! Finance stock forums, a publicly accessible Web site. Like many individuals, Mackey posted his thoughts online as a way to engage in dialogue with others
interested in similar issues. What made Mackey’s activity worrisome is that he posted
under the name “Rahodeb” (an anagram of his wife’s name, Deborah), thus disguising
his identity, and discussed issues central to the financial well-being of Whole Foods.
Whole Foods Market, Inc., was the world’s leading natural and organic food retailer
with more than 270 stores in the United States and United Kingdom. Its core values
emphasized “selling the highest-quality natural and organic products available, satisfying and delighting our customers, supporting team member happiness and excellence,
caring about our communities and our environment, and creating ongoing win–win partnerships with our suppliers.” The firm proudly proclaimed, “Everyone around here strives
to honor this golden rule of environmental stewardship: reduce, reuse and recycle.”
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Some people began to question if Whole Foods’ top management believed in and practiced these core values when they learned about the Web postings by the firm’s CEO.
In his posting, Rahodeb (Mackey) cheered Whole Foods’ impressive financial results
and praised himself. “While I’m not a ‘Mackey groupie,’ I do admire what the man has
accomplished—building a $1.6 million business from scratch is quite an achievement,”
said Rahodeb (Mackey) in 2000. He also defended Whole Foods in response to others
who criticized the company online, arguing that “quarterly cash flow variance isn’t statistically meaningful because the time period is too short.”
Rahodeb also attacked Whole Foods’ main competitor, Wild Oats Market. Rahodeb
questioned, “Who would buy OATS [Wild Oats’ stock symbol]? Almost surely not at current prices. What would they gain? OATS locations are too small.” Rahodeb speculated
that Wild Oats would slide into bankruptcy and would be sold after its stock price fell
below $5 a share. A month later, Rahodeb wrote that Wild Oats’ management “clearly
doesn’t know what it is doing . . . OATS has no value and no future.”
In February 2007, Whole Foods announced plans to purchase Wild Oats Markets for
$565 million, or $18.50 a share. The merger would create a powerful organization in the
natural and organic food retailing industry. The Federal Trade Commission (FTC), believing that the merger would violate antitrust law since it would reduce competition and
raise prices for consumers, sued Whole Foods, blocking the purchase of Wild Oats.
Mackey responded, this time under his own name, saying that the government “has failed
to recognize the robust competition in the supermarket industry, which has grown more
intense as competitors increase their offerings of natural, organic, and fresh products.” In
March 2009, Whole Foods announced it had reached an agreement with the FTC and
sold 31 of its stores and relinquished the rights to the Wild Oats brand to reduce its
alleged monopoly of the natural foods industry.
The next day Mackey issued an apology. “I sincerely apologize to all Whole Foods
Market stakeholders for my error in judgment in anonymously participating on online
financial message boards. I am very sorry and I ask our stakeholders to please forgive
me.” Mackey also explained that he used an alias to avoid having his comments associated with Whole Foods and to avoid others’ placing too much emphasis on his remarks.
Whole Foods’ board of directors formed a special committee and conducted an internal investigation of Mackey’s actions but determined that the CEO had not violated
any company policy. The SEC, likewise, concluded that no wrongdoing had occurred and
announced that it was not pursuing any action against Mackey or Whole Foods. However,
the incident may have negatively affected the firm, whose 2009 first-quarter profits fell by 17 percent. Mackey responded to the financial news optimistically, saying, “We believe
our results demonstrate we can operationally adjust to lower sales volumes and believe
that this flexibility, combined with our improved balance sheet, will allow us to successfully manage through these difficult economic times and emerge a stronger company
over the long run.” Mackey also returned to active blogging, this time using his real
name, saying, “I cannot tell you how good it feels to be able to write in my blog again.”