Telling No Truths: Whole Foods Market, Inc.

"I sincerely apologize to all Whole Foods Market stakeholders for my error in judgment in anonymously participating on online financial message boards,” says co-founder, Chairman and CEO John Mackey, Whole Foods Market, Inc. “I am very sorry and I ask our stakeholders to please forgive me."

With the lead up to his apology and the very limited number of people he apologized to, I’m not sure this was the best decision, but the fact that this decision was made means fun time is indeed over. Given the possibility that Mackey did not act alone (or at least was not anonymous to everybody who perused Yahoo financial chat boards) while playing the part of the great masked Wild Oats stock vandal, “rahodeb,” it might be for the best. Will it work? Probably not.

Make no mistake, the Whole Foods Market, Inc. board retaining the firm of Munger, Tolles & Olson LLP to advise it during an independent internal investigation means that the damage down the road may very likely exceed “rahodeb” having fun at the expense of others. (The SEC began its investigation the day before.)

While there may be many revelations made during the internal investigation (let alone the SEC investigation), the need to investigate seems to mean: more people may have been involved (it’s hard to keep a secret identity secret for that long without sharing) or they feel a need to analyze whether any of Mackey’s comments did in fact impact Wild Oats stock at any time (online or off). Even more obvious, Whole Foods Market, Inc. wants to apply one of the few “golden no comment” clauses that most journalists respect.

"The Company intends to fully cooperate with the SEC and does not anticipate commenting further while the inquiry is pending." ... "The Board will refrain from comment until the internal investigation is completed."

Why does the “golden no comment” clause work? From a communication perspective, provided the board doesn’t start to squawk, refraining from comment during an investigation gives the company a badly needed pause in its communication, which to date, can be likened to someone hemorrhaging at the mouth. To be clear, the board is concerned about something enough that they feel it is prudent to censor their outspoken CEO for fear it will get worse before it gets better. Most journalists will respect such restraint provided it holds.

Why doesn’t the “golden no comment” clause work? Once a company issues the statement that silence is golden during an investigation, reporters have a nasty habit of looking for anyone and everyone for input and opinion. It almost assuredly increases speculation 100-fold because journalists can no longer turn to the primary source and they have to go out and look for new sources. There is also the risk of someone developing a Deep Throat complex and leaking information to the media, whereby the company won’t be able to respond to any of it unless it gives up its communication blackout. And once you give it up, it’s not fair to ask for it back.

There are other major downsides to applying “no comment during an investigation,” including: all other company news becomes irrelevant (you can’t effectively talk about produce in the room but skip the part where the elephant ate half of it); it makes the company look like there really is a fire under all that smoke (whether there is or not); and, finally, most importantly, it contradicts the concept that someone always talks (because they almost always do).

So, given the company's statements, we have moved from “whole” truths to “no” truths in the case study of Mackey and Whole Foods Market, Inc. Or perhaps, more appropriately, since others are ready to pick up where Mackey left off, we have entered the spin zone where there will be ample hot air about how it’s unfair to comment on a CEO because, as Laura Goldman submits, “I checked with lawyers and confirmed that the postings themselves are not illegal.”

With no disrespect intended, Ms. Goldman is right that this incident should not undo all the good work Mackey has done nor does it invalidate Whole Foods Market, Inc. as a viable company. However, even Journalism 101 students know that you can always find ample lawyers to argue either side of a case. Heck, that’s what makes court reporting sensational enough to have plenty of programming.

Besides, I think journalists and stock traders have been surprisingly kind to Mackey; it’s the public relations and communication people who seem to want his head the most (I’m in the minority by not asking for it, though I think he may have lost it anyway with the apology). Unfortunately for Mackey, I also think the split opinion over his fate will solidify in time; the reactive silence will point most in one direction.

Increasing Awareness: Organ Donation

If you trend “organ donation” on BlogPulse, an automated trend and search system for blogs developed by Neilsen BuzzMetrics, you’ll notice a spike yesterday. Today, when the results post, it will be larger.

Why the sudden interest in organ donation, a topic that generally sees only one or two mentions in the mainstream media? Two words: Antony Berkman.

This awareness spike is why I sometimes think of Berkman, president of BlogCatalog, as the polar opposite of Andrew Keen. Berkman believes social media can do great good and, every now and again, he sets his sights on an underserved or underreported social awareness issue to prove it.

Last time, members of his social blog directory focused on education, a campaign that directly benefited more than 1,000 students through DonorsChoose.org.

This time, after members requested an international issue, Berkman settled on organ donation. And, with an assist, BlogCatalog.com even received some mainstream media attention, including Medical News Today (the number one medical news search engine with 1.7 million visitors a month), drawing attention to what has become a global member-driven social awareness campaign. For his part, Berkman encouraged scores of bloggers to make history by participating in the campaign. It looks like they did it.

So who are these bloggers? As an open social blog directory, BlogCatalog.com members include people from all over the world, each with a blog (some have several), who cover a diverse range of topics. But today, most of them focused on some aspect of organ donation, depending on what best served their readers.

Some focused on success stories like Alex Pratt, who suffered from kidney disease for more than 20 years until finding a match at Matching Donors, some wrote on the darker topic of the Black Market as recently covered by Slate Magazine, and some asked their readers to visit OganDonor.gov or provided links to programs within their own countries. Others included how many people are waiting for transplants, ranging from more than 1,700 in Australia to over 2 million in China.

“When you look at the numbers, it’s very frightening. People are dying because they need organs and there are not enough available,” Berkman told me when I asked for NBCB why he chose the sometimes controversial topic. “So we asked ourselves what would happen if we chose one day to make organ donation the most talked about topic on the Web, and then asked our members to write around this important issue.”

Berkman says he is inspired with each new post on blogs like Go! Smell The Flowers, Healthy Lifestyles, and Sensibilid (AD). Together, he says, he knows they have all made a difference.

I think so. Not only does it raise awareness, but it shows me that we often find what we look for in the world or on the Web. Whereas some people work to support antidotal thinking that suggests social media is evil, Berkman employs it to encourage people to do good.

Flapping Over Flags: City of Las Vegas

In May, I wrote about a local controversy over Towbin Hummer's 30-by-60-foot American flag and how the Las Vegas City Council ordered it down after residents complained that it was just "too aesthetically unpleasing, too commercial, and too loud."

Today, The Las Vegas-Review Journal reports that the Las Vegas City Council will rehear the case on Aug. 1. The reason: District Court Judge Michael Villani sent the issue back to the City Council on Friday, finding that business owner Dan Towbin should have been allowed to have an attorney represent him before the council.

Adding this quick update seems especially appropriate today because while the Las Vegas City Council will discuss whether flying the American flag is "too aesthetically unpleasing," Nevada brothels were just given permission to advertise their services in Nevada counties where prostitution is illegal.

Selling Sex: Nevada Brothels

Steve Sebelius, editor of CityLife, seems especially happy in his post on July 12, reporting that U.S. District Court Judge James Mahan made a ruling for summary judgment on behalf of the plaintiffs in Coyote Publishing et. al. v. Heller. He should be: CityLife has some new potential advertisers.

What is Coyote Publishing et. al. v. Heller? It is a lawsuit filed by Allen Lichtenstein, general counsel to the American Civil Liberties Union of Nevada on behalf of several newspapers, that sought to void two state statutes that prohibited brothel advertising in counties where prostitution is illegal.

Right. Although some people do not know it, while the majority of the state allows legal prostitution, the two largest populated areas, Clark County (including Las Vegas, North Las Vegas, Henderson, Boulder City, and Laughlin), and Washoe County (including Reno and Lake Tahoe), do not have any form of legalized prostitution.

I co-wrote, with our former employee Ellen Levine, a feature on this subject for a First Amendment magazine back in 1994, when the Clark County Commission attempted to hinder legal and licensed escort services from passing out handouts because they were “a pedestrian hazard.”

Some of the arguments were sound, like those of Jim McDonald, a vice squad detective for the Las Vegas Metropolitan Police Department, who said once non-prostitution escort services were licensed, they had a tendency to add services until it was often difficult to distinguish whether they crossed the line or not. Other arguments were not so sound, those made by the Clark County Commission at the time, claiming “handicapped people in wheelchairs might not be able to get by someone handing out fliers.”

To be honest, it was hard not to sympathize (a little) with police officers despite the fact that escort handouts were protected by the First Amendment. Why? Well, a lot has changed since then; but in 1994, a modest $1 million per year paid five officers to make approximately 20 arrests per night. At the time, there were only about 200 illegally working girls in Downtown Las Vegas (considered the lowest) and up to five times that amount on the Las Vegas Strip (where the girls worked casino bars), depending on what events were in town.

But for the department, they also had a daunting task because many tourists have heard that prostitution is legal in Nevada, but do not know it is illegal in Clark and Washoe counties. Risqué escort advertising only reinforced the confusion. In fact, Thalia Dondero, then a Clark County commissioner, told me that the confusion would be even worse if it wasn’t for the restrictions of brothel advertising. (Brothels in other areas of the state could not even buy a tombstone advertisement in the Yellow Pages.)

Of course, the new federal ruling changes all this, allowing brothels that are legal in neighboring counties to advertise their services in counties where prostitution is illegal. I can only imagine the confusion will increase tenfold.

Despite leaning toward being a First Amendment purest, I wonder what this ruling might mean for the rest of the nation, given there are many legal products restricted and/or barred from advertising, tobacco and alcohol included. I can’t help but wonder if Judge James Mahan’s logic means it might even be okay for Amsterdam businesses to advertise hash in the United States.

I appreciate this might sound strange coming from someone who assisted a few gaming properties in their case to loosen or remove casino advertising restrictions, but my reasoning was pretty clear then: legal casinos have a right to advertise anywhere gaming is legal. But this new ruling, which I have yet to form an opinion about, seems to suggest legal businesses have a right to advertise even where their products or services are illegal.

“But for our part, the motive wasn't financial. (We're not going to get a raise, or avoid a cut in pay, because of this lawsuit.),” says Sebelius. “The motive was philosophical: We honestly believe that telling a newspaper it cannot accept truthful advertising from a legal, licensed business is wrong. It's prior restraint, and it does violence to the First Amendment's guarantees.”

You know, I’ve always liked Sebelius. For the most part, he’s a straight shooter. But this time around, even I have to wonder when he suggests that Coyote Publishing et. al. v. Heller won’t be a boon for media outlets, billboard companies, and publications like CityLife.

“Speaking of money, some will argue that the corporate masters of CityLife pursued this litigation only to make money from brothel ads. Personally, we don't think there's a gold mine there, but certainly, making money is what corporations do,” he said.

No gold mine? In Storey County, money made from licensing brothels generates the county’s entire operational funds. In Lyon County, the licensing supports most if not all of the county’s hospital. In fact, Dennis Hof, owner of the Moonlight Bunny Ranch and Bunny Ranch Two in Lyon County, has already said he will be tripling his advertising budget to go big in Reno.

Hmmm … I’m starting to think, no matter what anybody thinks of prostitution, that this First Amendment “victory” will eventually backfire, thereby allowing government to find new ways to limit free speech. Nowadays, you never know.

Underthinking Mackey: Steven Silvers

Is it possible to be right and wrong at the same time? Steven Silvers is the principal at Denver-based GBMS, Inc., a group of professionals who “understand the complex nexus of business, government, media and community in which organizations operate today.” And, as focused as he is on complex issues, his well-written post says the Whole Foods Market, Inc. crisis might not qualify. On one hand, he is very, very right.

There was little need for the Public Relations Society of America (PRSA) to send out a news release about "reputation impact of undisclosed-identity executive internet postings."

"Corporate executives in all areas of a company must be acutely aware of the ethical implications of communications they initiate, including those under the auspices of being a ‘private citizen,’" said Rhoda Weiss, national chair and CEO of PRSA, in the release (highlighted by Silvers) that aims to capitalize on the case with reactive comment.

Most people get that, I think, which is why Silvers proposes that the most simplified version of the Mackey study is “smart people sometimes do stupid things.” Then he goes on to write a better version of the release: “Don’t post comments on the Internet promoting your company’s stock and slamming your competitors while pretending to be someone else. This is wrong. You could cause a huge PR problem for your company. You’ll probably get sued, and you might be breaking the law. …”

It made me smile, before departing from his assessment a bit. It would be simple, but nowadays things have consequences that are not confined to where they belong. This will not be confined to Mackey. This will not be confined to Whole Foods Market. And this will not be confined to, well, anything.

The consequences, as expected, are likely to be tossed about by folks like Andrew Keen in his admittedly biased war against anonymity and amateurs on the Web. And perhaps, they will even reinforce the call for a code of conduct. And perhaps, there will be some new legislation. And perhaps, we’ll polarize it all.

“We have the most protected, covered, cautious and public relations-barricaded generation of leaders in history. Today’s tightly controlled, artfully packaged executives want to release and spout off, and they somehow think this is a forum where they’ll be held less accountable,” says Jeffrey A. Sonnenfeld, a professor of corporate governance at Yale. Indeed, and executives are not alone in feeling this way.

"It doesn't seem likely that investors who may have read these chat rooms would have had reason to act, thereby materially affecting the stock price, because the CEO's identity seemed to be concealed and the materiality of the comments made looks low," Stephen C. Chick, JPMorgan, wrote in a client note, adding that while Mackey's actions "lack judgment," they are unlikely to affect Whole Foods' stock price.

And there it is. Why is this case study complex? Under the surface of simplicity resides the very foundation of an increasingly challenging issue caused, in part, by public relations’ attempt to mold people into something they are not; the media’s shift to be less concerned with finding the truth and more concerned with gathering up polarized viewpoints; and the public’s desire to create labels for everyone but themselves, good or bad.

The concept that “perception is everything” has permeated every facet of our society to such a degree that most people are increasingly judgmental about the actions of others. And perhaps, it is from this very place where the desire to be anonymous in today’s society seems to have very little to do with people wanting to behave badly and much more to do about their fear of being judged.

Adding rules and increasingly strict guidelines on the Web will only make it worse. I propose our time and energy is much better placed in educating people that it doesn’t make much sense to lend anonymous sources credibility beyond a single comment. While some have better intentions, others have agendas.

"They [the FTC] are quoting rahodeb in some of their legal documents and no doubt seek to embarrass both me and Whole Foods through these disclosures," Mackey has said. In fact, Mackey reports he had fun doing it, implies that he has no regret or remorse, and doesn’t seem to know the difference between making casual anonymous comments about his competitor and manipulating stock.

Is it because he is eccentric or ignorant? Don’t be silly. Mackey isn’t typical, but he isn’t stupid either. He knows that the day he admits that what he did was wrong and apologizes for it will be the same day that the Securities Exchange Commission (SEC) will no longer need to prove that Mackey knowingly violated securities law, intentionally using his anonymous postings to manipulate price.

To be clear, of course what Mackey did was wrong. But virtually every outcome in this case will have little to do with reality and much to do with perception.

The Federal Trade Commission’s ability to prevent the merger will be based on perception. The outcome of the SEC investigation will be based on the determination of motivation, which will be based on perception. Shareholders will decide to buy or sell Whole Foods Market stock based on their perception. And the argument whether anonymity might be protected or abolished will be based on perception. It’s all based on perception because we live in a world that is increasingly focused on, well, perception.

After years of watching us trend toward creating pristine perceptions while nurturing the fear of being judged by others (who might discover the "truth"), maybe it’s time we remember that it is much more dangerous to allow the perception of a personal brand to drift dangerously away from reality and toward some idealized label than it is to manage a brand that represents who we really are; good, bad, or indifferent. (As even Albert Einstein once confessed, he only combed his hair that way for the benefit of the media.)

Or, in other words, Mackey might have considered it would have been equally “fun” to post his comments as himself. People would have the perception he was wacky (they do anyway) and there would be no crisis. But that's the simple part. The harder part is recognizing this issue is complex because we have made the environment complex.

Once we hung horse thieves, now we try to understand and justify them. Once we sought truth, now we celebrate opinion. Once people said what was on their minds, now they hide their thoughts unless protected under the veil of anonymity. Once we shopped because eating dinner with our family was fun; now we ask Whole Foods Market to make it fun for us. Simple indeed.

Questioning Perception: Geoff Livingston

Geoff Livingston, who pens The Buzz Bin, says the concept of "burying bad news and negative posts with a flurry of good news keeps coming up" again and again. He says it does on New Media Nouveaux and again online via an internal friend’s post at Pownce, which is a presence applicaton that allows you to send messages, links, files, and events to a defined network of friends.

Sure, I've seen this "bury bad news" tactic bantered about plenty: those who promote it (with qualified justifications) and those who do not (see rule 17). Some have even been suggesting that the Online Identity Calculator I employed on Thursday demonstrates why burying bad news and negative posts might work. It does not.

The argument for it is not new. It predates social media and is grounded in the argument that perception is reality. And there really is only one answer to whether that is true, um, sort of: yes and no.

In the world of communication (advertising, marketing, public relations, political consultation, etc.), people, products, and companies live and die by perception every day and all the time. But, to actively live with the mistaken belief that perception is reality is fraught with peril, delusion, and consequence.

For the past 25 years, I've nurtured what once was a .49 cent store-bought spider plant that has followed me from Las Vegas to Los Angeles to Las Vegas to Reno and back again. As you might imagine, after two-and-a-half decades, the plant has grown quite large — around 7 feet in diameter.

Anyone who visits my home is compelled to comment on the spider plant, usually something like "that is the largest spider plant I have ever seen" or "my goodness, your wife must really have a green thumb" (my wife always corrects them) or "you do a beautiful job at taking care of your plants, they are all so healthy."

Although several of these statement grace truths, all of them are really perceptions. Sure, I smile, nod, thank them, but never am I silly enough to believe that their perceptions, as welcome as they are, are grounded in reality. The truth is that my spider plant was in desperate need of a transplant; a pretty big job given the amount of soil and pot size. So despite its rich green color and vibrant leaves, I had been ignoring my plant much like some people ignore their personal brands.

The worst of it occurred while I was on holiday. One missed watering and record aridness (we are now the most arid city in the nation), prompted me to dig a little deeper past all the lush, beautiful green outer leaves to find, um, a crisis. While perception seemed to dictate everything was okay (except some minor bruises), the plant had three major problems: it had created a root layer that was preventing water from reaching the lower layers of the soil; the lower layers of the soil were bone dry as a result; and the plant had literally uprooted itself, with a good 3 inches exposed.

Fortunately, I am good with plants so I managed to save it. Of course, now it only measures 5 feet in diameter and will take a couple of days, if not weeks, to fully recover. I even potted all the babies to produce what will be another beautiful plant. So what does my plant have to do with personal brand?

You can bury bad news and negative posts all you want to create the illusion of a huge and beautiful online image, but sooner or later something will need to be done beyond burying damaged roots with big leafy stories.

Now I cannot go as far as Livingston does and say that all "bad news or negative posts" need to be addressed very publicly (every situation is dependent on too many factors to apply a formula), but I do agree that burying anything is an erroneous idea. As I mentioned when I shared the first sliver of my Fragile Brand Theory, brand damage is generally proportiate to the discrepancy between perception and reality.