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Was John Mackey Forced Out as Whole Foods Chairman?

Gina-Marie Cheeseman
| Monday January 18th, 2010 | 6 Comments

John Mackey stepped down as Chairman ofthe Board of Whole Foods Market Inc. last month, and ever since people have wondered if he was forced out. The question is a fair one given the uproar over Mackey’s Wall Street Journal opinion piece which began by quoting former British prime minister Margaret Thatcher on the evils of socialism, and went on to condemn President Obama’s healthcare agenda.

Mackey wrote in the WSJ piece:

While we clearly need health-care reform, the last thing our country needs is a massive new health-care entitlement that will create hundreds of billions of dollars of new unfunded deficits and move us much closer to a government takeover of our health-care system. Instead, we should be trying to achieve reforms by moving in the opposite direction—toward less government control and more individual empowerment.

The CtW Investment Group, a shareholder activist group, called for Mackey’s removal because the WSJ piece damaged the grocery chain’s reputation. In a letter, CtW cited Mackey’s “lack of personal discipline and reputational risk,” and labeled him a “liability because of his ‘indiscretion.’” The letter said Mackey “attempted to capitalize on the brand reputation of Whole Foods to champion his personal political views but has instead deeply offended a key segment of Whole Foods consumer base.”

The letter pointed out that after the WSJ piece, at least 26,000 people joined a Whole Foods boycott page on Facebook. “Numerous commentators have noted that a boycott of Whole Foods by politically progressive customers could cause a significant loss of shareholder value,” the letter stated.

CtW Investment Group Executive Director Bill Patterson said,

This is not the first time Mr. Mackey’s unsanctioned communications have damaged Whole Foods’ image with consumers and investors.  At a time when shareholders are looking for Whole Foods’ management to focus on improving operations in an uncertain economy, we can not afford the risk to our Company’s brand reputation caused by Mr. Mackey’s indiscretion. He has become a liability and the board should begin the process of identifying a suitable replacement.

The January 4 issue of The New Yorker magazine contained a lengthy article profiling Mackey. Its author, Nick Paumgarten, noted that on the list of 13 books Mackey was reading, sent to him by a press representative, was a book titled, Heaven and Earth: Global Warming—the Missing Science. Paumgarten characterized the book as a “skeptical take on climate change.”

Paumgarten said Mackey told him that “it would be a pity to allow hysteria about global warming to cause us to raise taxes and increase regulation, and in turn lower our standard of living and lead to an increase in poverty.” He noted, “One would imagine that, on this score, many of his customers, to say nothing of most climate scientists, might disagree.”

Whole Foods customers tend to be environmentally-conscious and hold progressive political views. Whether Mackey was forced out or not, it is never wise to deeply offend your company’s customer base. As an article for Bnet asked, “Does he not know people who shop at Whole Foods?”

Ed Note: Post has been edited to correct the error on Mackey’s position. He stepped down as Chairman of the Board and remains CEO of the company.


▼▼▼      6 Comments     ▼▼▼

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  • loosywill18

    Voice your support for new Obama Health care plan at http://www.obamahealthcareplan.org

  • foodfolk

    John Mackey did not step down at CEO. He relenquished his role as Chairman of the Board to another Board member,. This is actually good corporate governance. The Board has been extraordinarily tolerant of some of his behavior, and he is not going anywhere soon.

    This is not the only blog ot incorrectly report the facts and therefore the implications of such a move. Many consumers have chosen to stop shopping at Whole Foods and many have continued to do so. But to imply that Mr. Mackey has “stepped down” as a result is completely falacious.

  • Make it right

    How can you be so wrong when reporting? John Mackey did not step down as the CEO. He relenquished only his title of Chairman of the Board to another Board member who has had all of the responsabilities of Chairman of the Board for some time. This is just a title transfer only and good corporate governance.

  • hog152

    are you really a reporter? seriously

  • corpgov

    Mackey stepped down from one role but essentially appointed what many might consider a lapdog board member to the position of Chairman. By his own admission in the SEC filing, Mackey agreed to the change “to avoid unnecessary distraction and protect the Company’s corporate governance profile.”

    Whole Foods is making the changes, not because they believe in good governance but because they want to avoid unnecessary distraction. Additionally, although the changes were made by the Board, it is obvious Mr. Mackey was “the decider,” as our former President would say. On his blog (12/29/09), Mr. Mackey writes, “Was I forced to give up the Chairman’s title? Absolutely not! Both the idea and the decision to give up the title were completely my own… At no time has anyone on the Board or in management ever asked me to give up the title.”

    John Elstrott now Chairman, has been on the board for 14-years. That should be a red flag to shareowners. Back in 1996 the relatively conservative National Association of Corporate Directors, in its Report on Director Professionalism, called for term limits. The NACD suggested a term limit of between 10 and 15 years.

    After about 10 years, most directors have been completely captured by the CEOs who brought them to the board and who decide their pay and perks. Long-term directors also get too comfortable. They are not generally innovating against themselves.

    If Elstrott ever was independent, he should no longer be considered so. Additionally, according to a report from The Corporate Library, three other directors are outside-related and three owned no stock (Jonathan Sokoloff, Jonathan Seiffer and Stephanie Kugelman). Shareowners should continue to push on directors to invest a substantial portion of their own wealth in the company (not through grants for board service but from their own savings) and should also push on them to act independently.

    Mackey was ahead of most with his vision of a shift toward natural food and his adoption of decentralized decision-making, something of an experiment in workplace democracy. Team members meet regularly to decide everything from local suppliers to who should get hired. Democracy seems to have worked well for Whole Foods at the shop floor level. It is time the company also adopted more of a democratic approach with regard to the Board and its shareowners.

  • corpgov

    Mackey stepped down from one role but essentially appointed what many might consider a lapdog board member to the position of Chairman. By his own admission in the SEC filing, Mackey agreed to the change “to avoid unnecessary distraction and protect the Company’s corporate governance profile.”

    Whole Foods is making the changes, not because they believe in good governance but because they want to avoid unnecessary distraction. Additionally, although the changes were made by the Board, it is obvious Mr. Mackey was “the decider,” as our former President would say. On his blog (12/29/09), Mr. Mackey writes, “Was I forced to give up the Chairman’s title? Absolutely not! Both the idea and the decision to give up the title were completely my own… At no time has anyone on the Board or in management ever asked me to give up the title.”

    John Elstrott now Chairman, has been on the board for 14-years. That should be a red flag to shareowners. Back in 1996 the relatively conservative National Association of Corporate Directors, in its Report on Director Professionalism, called for term limits. The NACD suggested a term limit of between 10 and 15 years.

    After about 10 years, most directors have been completely captured by the CEOs who brought them to the board and who decide their pay and perks. Long-term directors also get too comfortable. They are not generally innovating against themselves.

    If Elstrott ever was independent, he should no longer be considered so. Additionally, according to a report from The Corporate Library, three other directors are outside-related and three owned no stock (Jonathan Sokoloff, Jonathan Seiffer and Stephanie Kugelman). Shareowners should continue to push on directors to invest a substantial portion of their own wealth in the company (not through grants for board service but from their own savings) and should also push on them to act independently.

    Mackey was ahead of most with his vision of a shift toward natural food and his adoption of decentralized decision-making, something of an experiment in workplace democracy. Team members meet regularly to decide everything from local suppliers to who should get hired. Democracy seems to have worked well for Whole Foods at the shop floor level. It is time the company also adopted more of a democratic approach with regard to the Board and its shareowners.

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