Governance Experts Say Whole Foods Should Launch Internal Probe

Corporate governance experts say Whole Foods Market should launch an internal investigation in the wake of chief executive John Mackey’s chat room postings that criticized the company’s rivals. Is the incident a case of poor corporate governance?

A new Reuters report tackles the issue. It cites a recent Wall Street Journal report that found the Securities and Exchange Commission had launched an informal probe of Mackey’s postings. That probe, Reuters says, is a sign the issue will not go away any time soon.

“A Whole Foods spokeswoman said the company had not been contacted by the SEC and was unable to comment on the report,” Reuters added. But while corporate governance experts declined to say if Mackey’s comments were illegal, most wondered what the long-term impact was for his company’s reputation.

Reuters says Mackey used the message boards to predict a bleak future for Wild Oats Markets, the rival it has since sought to acquire. “He posted messages on a Yahoo financial forum under the user name “rahodeb” - an anagram of his wife, Deborah’s, name - according to a court document filed by the Federal Trade Commission and postings on Yahoo,” Reuters says.

Jacob Frenkel, a former enforcement lawyer for the SEC and federal prosecutor now with the law firm of Shulman Rogers Gandal Pordy & Ecker in Maryland, told Reuters that Mackey’s conduct was ill-advised but probably not illegal.

“If someone is putting out information with the purpose of suppressing or depressing the price of a stock, that could be manipulative,” Frenkel said.

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