The Two-Faced CEO: Citizen or Whole Foods Shareholder?

by cv harquail on August 24, 2009

In today’s transparent and political economy, the two-faced CEO can’t catch a break. When he acts as a Citizen, he might damage his organization’s reputation. When he acts as a Shareholder, he  might limit his own participation in our political conversation.  Neither option is good.  What’s a CEO to do?

200908241302.jpgThe broohaa over the anti-ObamaCare opinion piece by Whole Foods’ CEO John Mackey in the WSJ highlights for us once again the danger of being a two-faced CEO.

Two Faces: Citizen and Shareholder

Every CEO is two-faced, as is every employee. Each CEO has rights and concerns as a citizen, and each CEO has responsibilities and concerns as shareholder of the corporation he or she heads.  However, speaking out as a citizen in a way that contradicts the stated goals, purpose and reputation of your organization violates the CEO’s fiduciary responsibility AND violates the CEO’s leadership responsibility.

No Conflict? No problem.

When the CEO’s political beliefs align with the reputation and stated purpose of the organization, and the CEO speaks out in support of these beliefs, few people get wigged out. This is because we expect there to be a relationship between the publicly proclaimed values of the leader and the values of the organization.

And, our response to this political/personal behavior is easy. We either support the organization and those values with our purchases or we don’t , depending on whether we agree or disagree with these values.

200908241304.jpgBig Contradiction? Big problem

Customers, employees, and shareholders have all taken a financial interest in the organization through their purchases, their commitment, and their investment. All of these groups have contributed to the organization in part to support the values the company espouses. This is especially true with Whole Foods, an organization that has made its espoused values a central part of its brand and its appeal.

When CEOs exercise their rights to speak out as citizens, and they speak out in favor of policies that contradict the organization’s values, they often offend the shareholders and customers of the organizations they run. Shareholders, customers and employees support their organizations because of that organization’s collective values and stated purpose. These stakeholders often react quite negatively when CEOs contradict the organization’s values, because it is a repudiation of values that they themselves actively support. Stakeholders describe themselves as “betrayed”.

Whole Foods is seen as a ‘socially progressive’ organization (*whether correctly or incorrectly is a different question). Being against a national health care solution is the opposite of ‘socially progressive’.

Violating Fiduciary Responsibilities

When a CEO publicly proclaims a political position that contradicts the values of the organizations they run, these CEOs risk damaging the financial prospects of their organizations.

Two-Faced CEOs risk creating a situation where customers, suppliers, shareholders, and even public opinion turns against the organization.

When a CEO’s public behaviors contract the organization’s values, stakeholders become concerned about whether the organization will continue to pursue the business goals that they supported.  Stakeholders begin to wonder how this particular CEO can make the right choices for the organization in the future, if s/he CEO publicly opposes what the organization is working for.

Thus, stakeholders withdraw their financial support, because they lose trust in the organization.200908241303.jpg Sometimes, stakeholders even turn against the organization by promoting actions to punish the organization/CEO. They call for boycotts and organize protests. They take their business elsewhere. They invest their capital in other organizations.

200908241306.jpgCEOs violate their fiduciary responsibilities by making their organizations more vulnerable to competitors who can offer customers both similar products AND a commitment to similar values.

(I wonder how may local organic/health food stores, farmer’s markets, and CSAs will see an uptick in business this month? How many other supermarkets will see a little surge in their organic produce sales?)

Violating Leadership Responsibilities

When CEOs speak out publicly in support of policies that contradict the values and reputation of the organization, these CEOs are violating their leadership responsibilities.

By publicly contradicting the values that their organization is known for, these CEO lead stakeholders to withdraw their personal support of the CEO and his or her leadership. Stakeholders begin to question whether the CEO can sustain the organization’s values and its reputation. Stakeholders wonder whether they can trust the CEO to act as an inspiring leader, in ways that engage and motivate the commitment of that business’s employees.

What’s a CEO to do?

How can a CEOs manage their two faces, and be both a Citizen and a Shareholder?

1. Choose only to lead organization’s whose values you explicitly support.

2. Keep silent about your political values if they contradict the values of the organization.

3. Speak out as a citizen, but without taking advantage of the ‘bully pulpit’ provided by your high profile business role.

To speak as a private citizen, you shouldn’t identify yourself as the head honcho of a prominent business. You should only identify yourself as CEO when you are speaking on the organization’s behalf.

In this situation, Mackey tried to use his CEO role to demonstrate ‘business expertise’ and “social importance” — two qualities that belong to the role of CEO.

Mackey might instead have followed the model of Walmart’s new CEO, Mike Duke. Duke signed a petition against the rights of gays and lesbians to become adoptive parents in the state of Arkansas, identifying himself only as a private citizen, not as Walmart’s CEO. He did not trade on his role as the incoming CEO of Walmart to add heft to his perceived credibility or to add to his political influence (as Mackay has done). Duke’s strategy didn’t eliminate the problem, but at least Duke did not exploit his business role for political gain.

4. Craft and enforce an explicit separation between participation as a shareholder and participation as a citizen.

200908241325.jpg

Make it clear- before any incident- whether the person speaks for the organization, and whether the organization supports the specific politics of the person.

Consider how, last fall during the controversy over the Mormon Church’s support of California’s Proposition 8, Bill Marriott explicitly stated that Marriott as an organization supported LGBTQ civil rights. He explicitly directed stakeholders not to confuse his membership in the Mormon Church and his leadership role as the CEO of Marriott so that they would neither punish nor reward Marriott as though it were a “Mormon” organization. Again, this didn’t eliminate the problem of people punishing Marriott for the wrong reasons, but it certainly helped.

For the Two-Faced CEO who wants to exercise his responsibilities as a Citizen and a Shareholder, the choices are limited, and they are also limiting. In the absence of a situation where values align, there is always the possibility of a conflict between ones responsibilities as a citizen and ones responsibilities as a shareholder. Other than alignment or silence, each CEO must make some explicit choices about managing his organizational role and his role as a citizen.

Do you think that when CEOs speak out publicly against the values of their own businesses (1) violates their fiduciary responsibilities or (2) violates their leadership responsibilities? Is this something CEOs and businesses should be concerned about?

Please share your thoughts in the comments, below.

{ 5 comments }

Bernie White August 24, 2009 at 7:05 pm

Right on CVH. Trust suffers with this sort of cognitive dissonance. On a national level, and from a long way away (New Zealand), there seems a dramatic cognitive dissonance between the principles and values that America was founded on (and many aspire to) and the behaviours I read about in my paper daily. The healthcare debate as but one example.
Enjoying your blog, keep up the great work.

admin August 24, 2009 at 7:32 pm

Hi Bernie-
Thanks so much for your comment… it really is crazy how democratic and “American” principles are getting misused in this supposed ‘debate’. I think the health care situation is an especially interesting arena for the TwoFaced CEO dilemma because of the ways that American big business is an unreliable citizen… the choices that may seem preferable from the perspective of one organization’s P&L don’t look quite as good when you take a community perspective. …
Glad to find “The Moment” too! cv

Michael Roberto August 25, 2009 at 8:30 am

I don’t agree that Mackey’s comments “contradict the values” of the organization. Mackey has done a wonderful job of creating a great place to work that values its employees and provides good benefits. His proposals articulated in the Wall Street Journal do not contradict the values he has espoused at Whole Foods; they simply offer a different METHOD for achieving the goals of better, cheaper, more accessible healthcare. He doesn’t disagree with the ENDS for which the “progressives” strive; he disagrees with the MEANS. Too many of Mackey’s critics are confusing the ends and means. They are jumping to the conclusion that he doesn’t share their “good” intentions, which simply isn’t true. Having said that, Mackey should clearly have known that he would generate this type of reaction from the President’s supporters, of which there are many among his customer base.
.-= Michael Roberto´s last blog ..GM Board and Opel =-.

James Thompson August 26, 2009 at 11:36 am

I want to ask a question since in my research I’m failing to see that contradiction supposedly present. Mackey asserted that the government’s role in the health care arena is essentially to promote, not provide affordable health care. He asserted that health care is not an individual right that the Federal government has authority to intervene with relation to. How doe either of these two points conflict with Whole Foods mission or core values as a company? I’ve read through their published material online and find no mention of health care as a political ideal. They want to promote health through a wholesome diet but there’s no mention of promoting government provision of health care.

This whole mess seems to be more about the perceived values and political leanings of a corporation, rather than explicitly states values or political persuasions. Please tell me what I’m missing.

As a point of interest, I’m a non-partisan Constitutional conservative who agrees with Mackey’s overall assessment. I also am a Whole Foods patron who doesn’t give a rip what the CEO thinks, so long as he continues leading the company to provide products that I want to buy.

Grant McCracken August 29, 2009 at 12:36 pm

CV agree entirely. especially when the CEO has access to big public forums only because he or she is a CEO. They use the brand to address the public and then diminish it. doubly unjust. Thanks.
.-= Grant McCracken´s last blog ..Putting the gift back in the gift economy (with the fractional and the frictionless) =-.

Comments on this entry are closed.