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Thursday, July 12, 2007

The GC's Client from Hell

Yesterday I offered up some views on the Whole Foods/Wild Oats merger, particularly the Whole Foods CEO's ill-advised e-mails to board members.  It turns out the hypothetical conversation I posited would never have occurred.  It has now come to light that this guy is the client from hell.

Now I should note that I love Whole Foods.  I would have to, to pay the premium one pays there, particularly when the low fat ice cream selection stinks as badly as it does.  And I should also say that a general counsel calling his or her CEO a "client" is an undue formalism that would probably portend a disastrous relationship were the GC actually to see it merely as "lawyer-client" as opposed to "don-consigliori" or "friend-friend."  But I digress.

Oh my god.  He was on the freaking Yahoo chatboard.  Under a pseudonym it would take most of the  Yahoo chatboard psychos about ninety seconds to figure out.  (N.B.: the Yahoo chatboard is to publicly traded stocks what lawschooldiscussion.com is to law school admissions.) I once was the general counsel to a CEO with hyper-sensitivity to what was said on the board, and more than once I threw myself bodily across his computer keyboard to stop him from going online to respond to comments about him or the company.  Not only do you have the obvious securities disclosure issues; not only do you have the "gold medal in the Olympic ten meter stupid embarrassment" event; but you also have the issue whether the company has endorsed the chatboard as an authorized outlet for company discussion, thus, at least in theory, making the company liable for the various defamations of its executives and their families that occur on a daily basis.

Oy vey.

Posted by Jeff Lipshaw on July 12, 2007 at 03:37 PM in Corporate | Permalink


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Tracked on Jul 31, 2007 3:41:02 PM


If you are a director, at this point, you do nothing...that is, until you have to. You might consider "coaching up" Mr. Mackey if he makes it through the crisis, though someone who suffers from such bouts of moronia is not likely to be reformed at his age.

I say just grin and bear it, particularly if the Feds are willing to let it go with a few whacks on the wrist. If they appear zealous, then, well...

Posted by: The Divagator | Jul 13, 2007 11:59:48 PM

Thanks for the thoughtful comment, Ron. Just what are the limits on outrageous but not quite unlawful conduct one should set on an otherwise productive CEO? Getting sloshed at the company Christmas party and calling the Senior V.P. - Health & Safety "Toots"? Losing his temper on a regular basis and letting off strings of obscenities that can be heard throughout the building? Sounds to me like Mr. Mackey gets results for his shareholders. I'll bet he has a family and doesn't kick his dog. Good for him. I'll bet he'd get the same results without the really stupid forays onto the chatboard, and the ill-advised and uncounseled memoranda to his board. Personally, I like to root for athletes who are clean and sober, and be the GC to CEOs who act like professionals.

But of course the comment does raise an interesting issue. What does a board of directors, charged with a fiduciary responsibility to the shareholders, do in this case? Should it be concerned with anything other than bottom line results? Can it actually assess the long-term quantitative impact, if any, to the adverse publicity? Is it, or should it be, within the safe harbor of the business judgment rule to compromise one's sense of propriety in favor of financial results?

As for the ad hominem, I never respond to anonymous posters. Sarcasm never works in writing. And it wastes me limited brainpower.

Posted by: Jeff Lipshaw | Jul 13, 2007 2:44:41 PM

Mackey engaged in a debate about the stock price and the competitive landscape -- oh the horror! Get a grip Lipshaw. No wonder your clear thinking has landed you atop such a high level academic institution. If you took the time to learn about the company and Mackey, you would realize that he is one of the best CEOs in the world -- all for the outrageous salary of $1 per year. Save you limited brainpower for the true bad guys in this world.

Posted by: Ron | Jul 13, 2007 12:05:20 PM

That Mackey's behavior was irresponsible is without a doubt. Whether it was also criminal is the issue. Mackey deliberately used his anonymous attacks to hurt his competitor, and likely to drive down the value of a stock Whole Foods would try to acquire.

Will the blogosphere's defenders of transparency rush to condemn this unethical behavior by a supposedly "good guy company" with the same fervor that was directed against other larger corporations? Don't you think Wal-Mart's "flogging across America" was pretty tame by comparison?

What will blogs become when they grow up? Join the conversation at http://jon8332.typepad.com/force_for_good/2007/07/what-will-blogs.html

Jon Harmon

Posted by: Jon Harmon | Jul 13, 2007 9:38:02 AM

Whole Foods:corporate law::Hewlett Packard:privacy law

Posted by: Bruce Boyden | Jul 12, 2007 4:27:04 PM

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