A CEO who cares: Whole Foods founder John Mackey thinks profits and ethics can mix

National Catholic Reporter, Nov 25, 2005 by Colman McCarthy

Hard times are here for corporate America. People of conviction--as in being convicted of crimes ranging from fraud to perjury--are going from boardrooms to courtrooms to jail. It's worth keeping in mind, though, that a few CEOs remain as models of ethics in both their personal and professional lives.

Look no further than John Mackey. In 1978, when he was 25 and had dropped out of college where he studied philosophy, he and a friend opened a natural foods store in Austin, Texas. With a yen for long shots and a grubstake of $45,000, Mr. Mackey took a salary of $50 a week. Up against the large grocery chains, plus a public that largely dismissed natural and organic foods as the diet of hippies, anarchists, vegetarians and assorted layabouts, his first-year sales totaled only $250,000.

Mr. Mackey hung on. His lone store eventually grew into Whole Foods, a publicly traded corporation that now has 165 stores and 33,000 employees in the United States, Canada and Britain. Last year sales reached $4.6 billion, net profits of $160 million and market capitalization over $8 billion. In the past eight years, the stock has increased elevenfold. Soon to join the Fortune 500, which is often the Misfortune 500 if firms that pollute and desecrate are included, Mr. Mackey has proven that a company committed to improving public health through food can not only survive but thrive. Unlike Safeway, Kroger, Winn-Dixie, Albertsons and other national food conglomerates, no Whole Foods store has ever failed. Another difference: The aisles of Whole Foods aren't lined with Coke, Wonder Bread, Cheetos, Fritos or Junkos.

Mr. Mackey is not your average corporate buccaneer. He directs at least 5 percent of Whole Foods' annum profits to nonprofit groups and pays his employees wages when they do community service. A free-market libertarian, he breaks ranks with conventional capitalism and self-absorbed money hustlers like legendary General Electric CEO Jack Welch by placing profits in a moral context. He told an interviewer recently: "While [Milton] Friedman believes that taking care of customers, employees and business philanthropy are means to the end of increasing investor profits, I take the opposite view: Making profits is the means to the end of fulfilling Whole Foods' core business mission. We want to improve the health and well-being of everyone on the planet through higher quality foods and better nutrition, and we can't fulfill this mission unless we are highly profitable. High profits are necessary to fuel growth across the U.S. and the world. Just as people can't live without eating, so a business can't live without profits."

In 2003 at the annual shareholders meeting, animal rights activists harassed and picketed Mr. Mackey for not paying enough attention to the treatment of farm animals by the meat industry. Rather than dismiss the activists as troublemakers and cranks who can't be pleased, Mr. Mackey talked with them. For months he continued the dialogue and dove into the animal rights literature: "The information persuaded me to change my mind." A vegetarian for more than 30 years, he escalated and became a vegan.

Anyone know of a CEO who not only is open-minded with his attackers but comes to agree with them? Last January, Whole Foods put up $550,000 to start the Animal Compassion Foundation to improve the quality of life for farm livestock destined for the stomachs of America's omnivores.

How does Mr. Mackey deal with the reality that however organic whole Foods meat may be, animal compassion is still not animal rights? How can he be a vegan and sell meat? He didn't duck the question when it came up last year on Pacifica radio: "whole Foods exits to meet the needs and desires of its customers, and not to pursue the personal philosophies of the founder/CEO ....

Those cannot be what business is based upon. We have to center our business around our customers, Our research has indicated that approximately 10 percent of our customers are vegetarians and 3 percent vegan. If our customers didn't want to purchase animal products, then we wouldn't sell them, but ... if we tried to do that, we would very quickly go out of business."

That may not satisfy purists who'd like whole Foods to become Holy Foods and stick to soy milk and tofu burgers, but it's enough for one entrepreneur who went online last month with this thought: "We recently became a vendor to Whole Foods and it has been enlightening. First to fired a company that is so committed to improving the world and health of people, and second to deal with honest business partners who aren't trying to screw you out of every nickel."

[Colman McCarthy, a former Washington Post columnist, lives in Washington where he directs the Center for Teaching Peace. He teaches courses on nonviolence at four universities and three high schools in the Washington area.]