Let's say you want to run a company that has values which sometimes conflict with simply making profits. Can you do it? Sure. There are all sorts of thing a Conscious Capitalist – to use Whole Foods CEO John Mackey's term d'art – might do to pursue good works alongside profits. If there's one avenue the Conscious Capitalist shouldn't take, however, it's going public. As Etsy has recently learned, running a company for good is kind of hard when you have shareholders whose sole objective is maximizing returns. The calculus here isn't complex.
For some reason, it's taken Whole Foods 25 years since its IPO to learn this basic fact. But now, thanks to Barry Rosenstein and Jana Partners, the Mecca of crunchy organic yuppie capitalism is finally feeling the full weight of actual big-boy capitalism. And boy does it suck for author-slash-health-guru-with-a-CEO-side-gig John Mackey:
“We need to get better, and we’re doing that. But these guys just want to sell us, because they think they can make forty or fifty percent in a short period of time. They’re greedy bastards, and they’re putting a bunch of propaganda out there, trying to destroy my reputation and the reputation of Whole Foods, because it’s in their self-interest to do so.”
Whether Jana is actively trying to destroy Mackey's reputation is debatable. Mackey's done some work on that front himself, overseeing Whole Foods as it suffered six quarters of flagging same-store sales and a general surrender to the forces of competition nipping at his heels. But the point about Jana's self-interest is exactly right. The thing is, it just happens direct result of Whole Foods deciding in 1992 that it would trade ownership stakes to Wall Street – yes that Wall Street – for cash. Mackey seems not to have quite comprehended this fact yet:
“These people, they just want to sell Whole Foods Market and make hundreds of millions of dollars, and they have to know that I’m going to resist that,” Mackey said to me at one point. “That’s my baby. I’m going to protect my kid, and they’ve got to knock Daddy out if they want to take it over.”
That Jana partners would do what it literally exists to do using tools that Whole Foods knowingly provided it is not just offensive to Mackey. It's a moral calamity on the level of good-vs-evil, organic versus conventionally grown, GMO vs non-. Here's Mackey with a not-so-subtle literary reference:
“Did you ever read The Lord of the Rings when you were younger? Do you remember the Ringwraiths?” he asks. “They were consumed by the Ring of Power. They became addicted to it and they became absorbed by it. Well, there’s an element in finance that consists of a bunch of Ringwraiths, and no matter how much money they have and how many billions they have, it’s not enough. They’re Ringwraiths. The guy behind Jana Partners, for example, who’s attacking us [Barry Rosenstein], he bought the most expensive home ever sold in America, for $147 million. And their mantra is basically shareholder value. They don’t care about the stakeholders or long-term value. It’s just, ‘How do we make as much money as we can as quickly as possible?’ ”
What really cheesed Mackey off, though, is the timing of the whole thing. In late April he had just begun the publicity junket for his book The Whole Foods Diet (spoiler: it's healthy). And that's when Jana struck:
It’s unbelievable timing, I note, that the Jana news would come out precisely as he was beginning his book tour—so unfortunate, because he presumably didn’t want to be out doing public events while controversy swirled around his company. “The timing was intentional,” Mackey says curtly. He tends to speak softly, and he presents himself like your rumpled, slightly kooky, uncle until something snaps him to attention and a take-no-bull streak reveals itself. “They hijacked my book tour. It’s not that I think that they were trying to harm the book tour. It’s just like, ‘Okay, the CEO is going to be distracted. He’s not going to be able to give full attention to this.’ ” (Jana Partners declined to comment for this article.)
Of course, it wouldn't be a Manichean tale of moral executives battling against the rapacious forces of godless financial capitalism if there weren't a cameo from the Vampire Squid, whose interest in helping Whole Foods out is, to Mackey, less than wholesome:
“From that moment on, I was drowning in it,” Mackey says, “including when I got to Goldman Sachs. The CEO of Goldman [Lloyd Blankfein] wanted to meet with me because, of course”—he adopts a sardonic tone, a tic that tends to make his handlers stiffen up—“ ‘Goldman Sachs would love to represent you. If you guys are going to be sold, we’d love to make one hundred million dollars doing that. Don’t forget your buddies at Goldman Sachs!’ ”
The remarkable aspect in this whole saga isn't that hedge funds are swirling around the beleaguered Whole Foods as it tries to extricate itself from its deepest crisis in decades. That's just what they do. What's amazing is how long Whole Foods managed to avoid that kind of pressure. It was probably some combination of good timing and good management that allowed the company to grow for so many years while still holding onto some small kernel of its hippie past. But things have changed. At least Mackey might actually become conscious of capitalism now.
The Shelf Life Of John Mackey (Texas Monthly)