THE ANONYMOUS CEO: STRONG OR WEAK ETHICAL LEADER? John Mackey, CEO of Whole Foods, the 1 answer below »

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THE ANONYMOUS CEO: STRONG OR WEAK ETHICAL LEADER? John Mackey, CEO of Whole Foods, the country’s No. 1 natural and organic grocery store chain, was exposed in July 2007 of having written more than 1,300 anonymous postings on a web-based Yahoo! Finance stock forum between 1999 and 2006. His messages on the discussion forum bashed competitors and praised his own company. Whole Foods is a giant firm, with thirty-nine thousand employees spread over 196 stores in the United States, Canada, and the United Kingdom. At the end of fiscal 2006, the company’s gross profit margin was 35 percent, compared with 24 percent at Kroger and 29 percent at Safeway. It had sales of $

5.6 billion. Mackey, who took on the pseudonymous name “Rahodeb” (an anagram of his wife’s name, Deborah), was “outed” by an FTC court filing in July 2007. The Securities and Exchange Commission began an examination of the CEO’s postings to determine if he broke any laws. Interestingly, Mackey’s alter ego was exposed by the FTC, which filed a lawsuit seeking to block Whole Foods’ planned purchase of Wild Oats, its main competitor, on antitrust grounds. Mackey apologized to the Whole Foods’ board for his actions. The board announced it would begin an internal investigation of the matter. In some postings, Mackey (as Rahodeb) bashed Wild Oats, criticizing their former CEO for lack of vision, while noting that it wasn’t a profitable company. In a February 2005 posting, Rahodeb apparently wrote with some delight that Wild Oats was going to have to restate its earnings. Rahodeb went on to say that OATS had been misleading its investors for years and that the company was headed for shareholder litigation. He also questioned OATS leadership by raising questions about its competence and integrity. In spite of these comments, Whole Foods began an effort to acquire Wild Oats, its main rival, in February 2007, but the FTC was seeking to block this purchase on antitrust grounds. In a public statement posted on Whole Food’s website, Mackey claimed that his anonymous postings did not reflect his or his company’s policies or beliefs and that some of the views of Rahodeb did not even match his own beliefs. A few antitrust experts say that some of Mackey’s Yahoo! messages could hurt his company’s case and be used against him if they support the view that the health-food market is a distinct market, separate from the mainstream grocery market. The FTC was trying to argue that the health-foodmarket was distinct and that the acquisition would increase concentration in that narrow market and drive up prices. Some experts on corporate governance and others who serve as image consultants have held that Mackey’s exposuremay cause the company’s board to question his leadership abilities. It was announced in August 2007 that Whole Foods Market had completed its acquisition of Wild Oats, after months of delays by the antitrust authorities. Mackey explained that he had made the online comments anonymously because he had fun doing it. Some of his defenders have said that his comments were never intended to disclose insider information or to move stock prices.

1. Were Mackey’s actions more representative of a strong, moral leader or a weak, uncertain leader? What insights into his character are revealed by this episode? Is it ethical for a CEO to engage in such deceptions?

2. Do you see Mackey’s actions as positive, negative, or indifferent in terms of setting a strong ethical tone for his company?

3. Were Mackey’s deceptions just a harmless, fun activity, or do they have harmful implications for Whole Foods in the future?

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