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Dodge v. Wholefoods?
Posted By Dave Hoffman On February 15, 2013 @ 11:45 am In Corporate Law | 3 Comments
Like many corporate law teachers, I have mixed views about the old chestnut of Dodge v. Ford . On the one hand, it’s very quotable. On the other, shareholder wealth maximization is a normative goal, not a rule with teeth. Still you go to war with the data you have.
Now we’ve more data – useful for an exam fact pattern, at least! An alert student (thanks, C.M) found this choice quote in a recent interview  of Wholefoods CEO John Mackey:
“JOHN MACKEY: I think that Whole Foods does have higher purposes. We take them very seriously. We don’t exist primarily to maximize profits.
We’re fulfilling the mission that we set for ourselves of helping people to live healthier lives, to hopefully reverse this obesity crisis we have in America. Whole Foods does feel this sense of responsibility to try to make a difference. And that filters through our team member base to our customers. We really are united around kind of our mission as an organization. That really makes a difference.”
Now, obviously this is a branding statement – which could be interpreted as a way to make money by convincing customers to pay more for fruit than they ought to. And maybe nothing Mackey says should be taken very seriously. See, e.g., fascism  & sockpuppets . Indeed, he’s certainly  said CSR-like things like this before . But it’s still striking to see a CEO say essentially what Henry Ford said (and was punished for saying) in Ford v. Dodge. In the interview, Mackey also was asked about why his perspective is rarely articulated by CEOS. Check out his answer after the jump.
“SARAH GREEN: Why do you think that so many business people seem hesitant to come out and actually say, yes, I have a higher purpose than making money or I create value and money is a byproduct. Why are we still having this sort of shareholder value conversation?
JOHN MACKEY: That’s a good question. I think there are probably several reasons. One reason is that that’s what they’re taught. I mean, that’s what they’re taught in most business schools.
I’ve talked in dozens of business schools around the United States, and I’ve talked to students and their professors. And you look at the textbooks. The assumed purpose of business is to make money for the shareholders.
It’s not debated. It’s not discussed. It’s taken as a given. It’s the air that they breathe.
The economists have taught that for centuries. If you go back and study the history of economic thought, that was always taken to be the starting point. Again, because the ethics were taken for granted, it was thought that business was about making money. So that’s been the narrative.
Thirdly, I think for business people, they don’t want to be seen as– they may have some little bit of a macho thing. I don’t want to be seen as weak or soft headed. Business people, they want to think of themselves as kind of tough and they can make the tough decisions.
So when you start talking about purpose, some business people, a lot of business people– I think it’s changing, I think, for a good reason because a lot of women are now in business. And I think that’s helping to transform this way of thinking. But it hasn’t been thought to be good. If you’re weak, you’re going to get run over.
They’ve got a lot of war metaphors in business. Business is about crushing the competition and rolling over people. And the whole business enterprise has got war metaphors or it’s got Darwinian metaphors. Kill or be killed. Survival of the fittest. Only the paranoid survive.
So you’ve got a mythology in business where this exists. And that’s why I say we need to change the narrative. And that means, in a sense, we need to change the mythology. It no longer serves us. It’s really holding back the potential of humanity.
And it’s really holding back business’s potential to be the force– that’s why the subtitle of our book is Liberating The Heroic Spirit of Business. By changing the narrative, by changing the mythology, we can liberate business to consciously go out there and create value for all these stakeholders from a sense of higher purpose. And if more and more businesses begin to think that way, the world is going to evolve upward in a very rapid pace.”
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URLs in this post:
 Dodge v. Ford: http://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Company
 interview: http://blogs.hbr.org/ideacast/2013/01/whole-foods-john-mackey-on-cap.html
 fascism: http://www.newsmax.com/TheWire/whole-foods-obamacare-facist-socialist/2013/01/16/id/471765
 sockpuppets: http://www.nytimes.com/2007/07/16/technology/16blog.html?pagewanted=all
 certainly: http://www.newyorker.com/reporting/2010/01/04/100104fa_fact_paumgarten
 CSR-like things like this before: http://www.trendhunter.com/keynote/business-consciousness-keynote
 : http://www.amazon.com/The-Secret-GEs-Success-Competitive/dp/0071475931/
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