Rotten Behavior at Whole Foods

There's a strange new chapter in the ongoing saga between Whole Foods Market (Nasdaq: WFMI  ) and the FTC. For eight years, Chairman and CEO John Mackey apparently used an anonymous alter ego, "Rahodeb," to post on Yahoo!'s (Nasdaq: YHOO  ) wild and woolly investing message boards about his company, the competition, and his haircut.

Just a few days ago, I quoted statements from Mackey's own blog about the importance of transparency and honesty in the Internet age. I think the substance of Mackey's words still holds true, but anonymous pseudonyms are anything but transparent. Given our Foolish spirit of full disclosure here, Mackey's online masquerade is an unpleasant turn of events.

Pay no attention to the man behind the curtain ...
Mackey's fessed up about the posts, and at first blush, you might see some logic -- however misguided -- in his desire to speak his mind without letting his position influence others' opinions. In Whole Foods' defense of the action, Mackey said the posts didn't reveal any "official beliefs, policies, or intentions," nor any proprietary information. Check out his words, then look into the posts, and draw your own conclusions.

The hubbub may have little bearing on the continuing FTC skirmish over Whole Foods' acquisition of Wild Oats (Nasdaq: OATS  ) . CEO conduct may influence shareholders' and customers' perception of a company, but it doesn't much affect whether or not a deal is anticompetitive. Mackey has said that the FTC wants to smear his character, which should have no bearing on the commission's case against the Whole Foods-Wild Oats merger. Then again, the best way to avoid assaults on your image is to keep your nose clean in the first place.

Adopting another identity online may be common -- perhaps even among the top ranks of corporate execs. Such alter egos are par for the course in online games like World of Warcraft or Second Life. But that kind of masquerade's not always ethical when it comes to business.

Companies have gotten into hot water for creating ersatz sites or personas online. Sony (NYSE: SNE  ) got slammed by customers for creating a fake blog last year to pitch its PSP systems. Wal-Mart (NYSE: WMT  ) also got a black eye for a similar endeavor. I can't scorn their behavior without criticizing Mackey's as well. In his online disguise, the Whole Foods CEO not only lambasted the competition, but also admitted to being a "pumper" in one post (albeit an unpaid one).

Walk the talk ...
I'm fond of Whole Foods, I've applauded John Mackey's leadership in the past, and I still think the FTC's interference with its proposed merger is whacked out, given the companies' competitive landscape. When he's not making the rounds on Yahoo! message boards, Mackey is obviously a smart businessman who knows how to run a successful company. But the smartest people may sometimes be less likely to watch their steps. Pride, as they say, goeth before the fall.

In the wake of the revelation, the media's buzzing about whether John Mackey should step down -- or get fired. However well Whole Foods' CEO knows his business, he's also crossed an important ethical line. While I'm not condoning Mackey's behavior, I'm worried about what Whole Foods might become without him. Either way, it's a difficult call to make.

Whole Foods Market and Yahoo! are Motley Fool Stock Advisor picks. Wal-Mart is a Motley Fool Inside Value recommendation. Try any of our Foolish newsletters free for 30 days.

Alyce Lomax owns shares of Whole Foods and roams the Fool's discussion boards under her Foolish alias identity TMF Lomax. The Fool is all about full disclosure -- and it's got a cute haircut, too.


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