The following is a repost of an article by James McRitchie first published on corpgov.net on January 8, 2016.
In the wake of a New York Times story by Mark Oppenheimer about Whole Foods Market CEO John Mackey’s relationship with former rabbi and alleged sex offender Marc Gafni, the company has come under scrutiny. (A Spiritual Leader Gains Stature, Trailed by a Troubled Past)
On December 25th, The Times story reported Gafni saying of one of his alleged victims, “She was 14 going on 35.”
John Mackey/Marc Gafni Connection
Also reported in Oppenheimer’s story, “A co-founder of Whole Foods, John Mackey…is a chairman of the executive board of Mr. Gafni’s center, and he hosts board meetings at his Texas ranch.”
James McRitchie, a California investor and shareholder activist emailed members of the Whole Foods Board of Directors on New Year’s Day:
Mr. Mackey has a fiduciary duty to WFM shareholders. His affiliation with Gafni and the center certainly put the reputation and value of WFM at risk.
A group of more than 100 rabbis has launched an online petition, demanding that Whole Foods sever ties with Gafni. At the time of this writing, the petition has garnered more than 2800 online signatures. It includes comments from people claiming to have had unfavorable contact with the former rabbi.
The flow of follow-up stories has been steady.
Oppenheimer filed these follow-ups in Tablet:
•Understanding the Marc Gafni Story, Part II
•More voices weigh in on Marc Gafni Controversy
New York community newspaper The Jewish Week, which had originally broken the Gafni allegations story in 2004, reported,
Some critics contend that Mackey, in his capacity as an executive board member of Gafni’s nonprofit center, is violating his fiduciary responsibility to the ethical values of Whole Foods. (Gafni Faces Fallout From New Age Community)
Michael Silverman, Whole Foods Market Global Corporate Communications representative emailed this statement:
John Mackey’s involvement with Marc Gafni and the Center for Integral Wisdom is his personal business and does not represent an endorsement or support for either Mr. Gafni or the Center for Integral Wisdom by Whole Foods Market.
A similar statement appears on John Mackey’s Whole Foods blog:
My involvement with Marc Gafni and the Center for Integral Wisdom is conducted strictly in my personal life…
However, the accuracy of Mackey’s and Whole Foods’ statements, characterizing the CEO’s relationship with Gafni as “personal” is in question.
As a director on the board of Gafni’s Center for Integral Wisdom, a tax-exempt California nonprofit corporation, subject to state and IRS laws and regulations, Mr. Mackey has fiduciary duties to the organization.
According to Gene Takagi, an attorney with the NEO Law Group in San Francisco, “All directors of a nonprofit corporation have fiduciary duties of care and loyalty to the corporation.”
The IRS prohibits tax-exempt organizations from engaging in commercial, for-profit business activities. A website for the CIW’s Success 3.0 Summit says, “Success 3.0 is an independent LLC generated by the Center for Integral Wisdom,“ and “John Mackey, (Board Chair CIW).”
John Mackey Named in Complaints
Complaints were submitted Wednesday to the IRS and California state Attorney General’s office, questioning federal tax and state nonprofit regulatory compliance by the Center for Integral Wisdom. John Mackey was named in both complaints, as Board Chair of the organization.
Investors Are Watching John Mackey and Whole Foods
I spoke with public relations representatives from socially responsible fund managers Calvert, Domini, and Parnassus, all of which hold Whole Foods Market stock in their active equity portfolios. As of this writing, none of the firms have commented.
Shane Yonston, a Principal Advisor with Impact Investors emailed:
Whole Foods positions itself as a socially responsible company, which is an important part of its brand. If these core values come into question by employees, consumers, partners, or investors, it can have long-term damaging effects on the company’s stock value. Reputational risk is real, and the way Mr. Mackey chooses to handle this conflict will certainly be watched by investors in the SRI community.
Certainly, we are watching.