Whole Foods CEO John Mackey and “Conscious Capitalism” – putting lipstick on a pig

John Mackey is the co-CEO of Whole Foods Market, its founder, and a self-proclaimed independent libertarian. Mackey has also recently authored a book, “Conscious Capitalism.” While he speaks in platitudes about corporations acting as conscientious citizens of the world, Mackey’s actions as CEO of a major corporation betray his real motivation.

Mackey was forced to back pedal from his comments on the Patient Affordable Care Act (“Obamacare”):

Technically speaking, it’s more like fascism. Socialism is where the government owns the means of production. In fascism, the government doesn’t own the means of production, but they do control it — and that’s what’s happening with our health care programs and these reforms.

Mackey is dead wrong on the government-corporate relationship under fascism. Italian historian and fascism authority Emilio Gentile gives the authoritative description:

Corporative organization of the economy that suppresses trade union liberty, broadens the sphere of state intervention, and seeks to achieve, by principles of technocracy and solidarity, the collaboration of the ‘productive sectors’ under control of the regime, to achieve its goals of power, yet preserving private property and class divisions. (Payne, Stanley G (A History of Fascism, 1914-1945). University of Wisconsin Press. pp. 5–6)

More importantly, it is time to call Mackey’s vision of capitalism (and Whole Foods Market) what it is, and this writer does not use this term loosely. “Corporate fascism” is an accurate and apt description of the Mackey philosophy. Consider Gentile’s definition. above, in light of Mackey’s actions and writings.

Mackey is a staunch proponent of a corporate-centric economy, with no government or regulatory intervention. Both Whole Foods Market and Mackey are anti-union, anti-worker’s rights. The Mackey philosophy would see a collaborative corporate control over the means of production, to achieve its own goals of power through corporate solidarity (WMC, US Chamber of Commerce, etc.). Preservation of private property and class division are a necessity for the Mackey vision, as there can be no cheap labor production without class division. Ironically, Mackey is a proponent of the expansion of state intervention, as long as it is on behalf of corporate welfare expansion. There is plenty of proof to support this assertion…

On November 16, 2011, Mackey penned an op-ed by invitation in the Wall Street Journal, titled “To Increase Jobs, Increase Economic Freedom.”  In a response to Mackey’s article written on February 1, 2012, Badger Democracy addressed the fundamental arguments in the op-ed:

1. Cut the size and cost of government – 100 years ago, government spending was 8% of GDP; today it is 40% of GDP. This additional money spent by the government could be used to “create jobs.”

2. Cuts should be made in Social Security, Medicare, Medicaid, and Defense – many of these services could be privatized, using the “success” of Chile and Singapore as models.

3. Stimulate the economy by cutting taxes and regulations – Mackey explains that cutting taxes would “increase revenue… as entrepreneurs create new businesses and new jobs and as people earn more money.”

In his own op-ed, Mackey supports further provisions which would continue the US economy down a dangerous path. Greater corporate consolidation of power, greater consolidation of wealth, greater class inequity, and greater corporate influence on policy which would regulate said power.

The dagger in Mackey’s theory is a recent report in the conservative-leaning Financial Times, also reported in the New York Times. The article cites a steady decline in earned wages and a steady rise in investor income through profit and interest:

“58%…is the share of US national income that goes to workers as wages rather than to investors as profits and interest. It has fallen to its lowest level since records began after the second world war and is part of the reason why incomes at the top – which tend to be earned from capital – have risen so much. If wages were at their postwar average share of 63 per cent, workers would earn an extra $740 billion this year, about $5,000 per worker, according to FT calculations.”

More power and wealth for the corporate fascists, with less taxes and accountability means more money to influence and drive politics and policy:

 

Corporate Taxes Paid by US Corporations, 1950-2010

(Federal Reserve Bank of St. Louis analysis)

Corporate income tax graph

 

Cheap labor production is possible due to the expansion of the wealth gap and class disparities:

 

 

John Mackey’s Whole Foods Market has also forced employees to “vote” to cut their own wages and benefits. Wages have been cut due to reduction in hours, and employees will be forced to contribute more in spite of enormous corporate growth:

In 2007, WFM profits (after taxes and expenses) totaled $182.7 million. Four years later, in 2011, profits totaled $342.6 million – nearly double in 4 years.  For the first sixteen weeks of 2011, total profits were $88.7 million; for the same period in 2012, profits totaled $118.3 million. Store expenses have decreased by 38 points in 2011, including 28 points due to wage cuts. In real numbers, most stores have executed 3% cuts in labor over the past fiscal year, resulting in most employees seeing a 5-8% cut in wages (due to hours being cut).

Of course, Mackey built Whole Foods with his own two hands, with no government help (sarcasm)…therefore, government should stay out of his business. This is the great lie of corporate fascism. Mackey and his ilk want the government to work for them. The doctrine of so-called “corporate conscious” follows in the words of Gentile:

…broadens the sphere of state intervention, and seeks to achieve, by principles of technocracy and solidarity, the collaboration of the ‘productive sectors’ under control of the regime, to achieve its goals of power.

The corporate fascists would have us believe the great lie of their own self-determination and success, that personal strength and sacrifice alone built their empires. Mackey is as guilty of this as any of them. Whole Foods is a prolific recipient of government intervention and welfare on its own behalf.

In 2011, an $8 million tax break for a new Washington DC Whole Foods development raised questions of return on public investment and why public money was even needed:

And why does this project require a special subsidy to move forward in the first place?  This Whole Foods already would qualify for a set of tax incentives for grocery store development, including a 10–year property tax break on the store itself.  Moreover, while some projects near Nationals Park have languished in the recession, this area is likely to be part of the emerging rebound, thanks in part to prior public investment by the District.  Finally, if a Whole Foods will revitalize this neighborhood as it did in Logan Circle, why won’t private market interests step up to make it happen?

In the same year, Whole Foods received $4.2 million in tax subsidies to open a Detroit area store, uncovered only by FOIA requests:

The documents, obtained by the Chaldean News under the Freedom of Information Act and provided toCrain’s, show that Whole Foods is asking for $4.2 million in city, state and federal incentives to open a store in downtown Detroit.

According to the exchanges, the 21,000-square-foot project is expected to get $1.5 million in local and community foundation funds, $1.2 million in federal tax credits under the New Market program and $1.5 million in state incentives.

Michael Sarafa, president of the Bank of Michigan and co-publisher of The Chaldean News, questions the use of incentives to lure a national grocery chain to Detroit. He said there are 83 independently-owned grocers in the city, many of them owned by Chaldeans, who did not receive incentives.

 

Controversial “TIF” funds are being used for construction of a Whole Foods-anchored development in St. Louis, hardly in a blighted area.

The new Whole Foods development in the Hyde Park neighborhood of Chicago is being partially funded by an $11.3 million “TIF” in an already well-developed area.

Mackey is now on the record confirming that Whole Foods will begin eliminating full-time employees as a result of “Obamacare” being fully enacted. This in an interview with Greta Van Susteren:

…there will be a strong temptation for businesses to keep people under 30 hours, so they don’t have to provide health care. And you will have a lot of part-time workers and fewer full-time workers, a lot of people underemployed.

Whole Foods prided itself, we’ve always had a higher mix of full-time to part-time workers like 80 percent full-time and 20 percent part-time, which is very rare in retail. But as I suspect as our health care costs are driven up by health care reforms then we’ll end up gradually lower our full-time ratio to a much lower number.

There is no fiscal truth to this statement. As proven in Whole Foods’ own financial statements and a previous Badger Democracy blog, the company’s health care costs per employee are actually lower than they were before “Obamacare’s” passage. The reason for Whole Foods’ higher total costs is simple – the company is growing. With government and public help.

It is time to take the lipstick off the pig. The philosophy of John Mackey should be called what it is. Corporate freedom, rights, and independence over all – even the individual. No worker’s rights, no government regulation or intervention EXCEPT on behalf of the corporation and its own interests. In short…corporate fascism.

And Mackey calling “Obamacare” fascism? Pure projection.

 

Scott Walker would love Whole Foods Market – forcing employees to “vote” for increased benefit contributions…

By now, many have seen the video of Wisconsin Governor Scott Walker promising billionaire widow Diane Hendricks to “divide and conquer”, as a means of pursuing right-to-work legislation in Wisconsin. The effects of “right-to-work”, even as a philosophy, leads to treatment of employees that is inherently unfair. Even as a company like Whole Foods Market (WFM) presents a “corporate conscience” to the public – they are currently forcing employees (“Team Members”) to partake in a “benefits vote”, selecting which increases in employee benefit contributions they wish to make. All this while WFM is enjoying unprecedented growth and profitability. It is a stark and hypocritical example of how workers making $13/hour are valued less than the $4 products on the shelf – and what adoption of right-to-work would mean to workers. Whole Foods is a very profitable company. Based on the company’s own 10k filing with the SEC, WFM’s growth and profitability is outpacing the cost of medical insurance (more on that later). Yet employees were required to attend a 30- minute class in April to educate them as to why the “vote” to cut benefits is so important. The choices and proposed cuts will affect everyone – especially those with more years’ experience and families to support. Increased benefit contribution will cost employees between $500-$3000/year (estimated). The average wage for a WFM employee is about $13/hour.

The cover page of the “Your Complete Guide to the Benefits Vote Primary” (complete pdf linked) booklet state the case: “The Vote …supports our stakeholder philosophy and principle of shared fate. The concept of shared fate describes how we all have an equal stake in the company’s success.” Whole Foods’ core value #3 is “We support Team Member happiness and excellence.” What does this “shared fate” mean to employees that WFM cares for so much – and does WFM share in it’s success? The basic premise for this “vote”, and subsequent benefits cut is as follows:

  1. Cost increases over the past three years of 10.2% on average.
  2. WFM paying 90% (10% Team Member) of health costs, expected to increase to 91%/9% in 2012.
  3. Health Care costs to WFM will amount to $193.3 million (projected) in 2012.

The numbers WFM presents are accurate. The context in which they are presented are a farce. As WFM is a publicly traded company, all the following information is available in the 10k filing link above. Taking the 10.2% cost increase at face value, that is a total cost increase, not per capita increase. When a company grows, and adds more employees, its total health insurance costs will increase as a result of insuring more employees. For the same time period, WFM is projecting a sales growth of 13-15%. This includes a growth of 18-20% in “earnings per share” to investors in WFM stock – many of whom reap the benefits of team members’ labor without actually working in a WFM store.

In 2007, WFM profits (after taxes and expenses) totaled $182.7 million. Four years later, in 2011, profits totaled $342.6 million – nearly double in 4 years.  For the first sixteen weeks of 2011, total profits were $88.7 million; for the same period in 2012, profits totaled $118.3 million. Store expenses have decreased by 38 points in 2011(page 22 of the 10k pdf above) including 28 points due to wage cuts. In real numbers, most stores have executed 3% cuts in labor over the past fiscal year, resulting in most employees seeing a 5-8% cut in wages (due to hours being cut).  As a percentage of sales, WFM costs are decreasing, sales and profits increasing. This includes the cost of insuring employees. The cost of health insurance, as a percentage of sales will remain well under 2%. In fact, for fiscal years 2010 and 2011, costs to WFM totaled $101.1 million and $109.4 million (pg 40 of the 10k filing). This amounts to 1.1% of sales for both years. Projections would put the cost at about 1.1-1.3% for 2012. According to the IRS data, the national corporate average is 1.6%, putting WFM at the low-end of health costs as a percentage of sales. In fact, page 33 of the 10k filing indicates that all payroll, benefits, and bonuses due team members have remained at about 2.7% of the total sales – sales totaling $10.1 Billion in 2011.

Employees have no choice in the vote. At one store, when vote participation was lagging, employees were taken off their work stations and forced to vote on the clock, by team and store leadership. The “Benefits Vote Worksheet” (full pdf link) outlines the proposed cuts, choices, and costs to employees of each. Cuts are assigned points – all employees were instructed to keep selecting cuts until they reached 15 points. They were then allowed to submit their vote. The final vote will take place in June, with employees having no voice or choice – their benefits will be cut while Whole Foods continues to grow and reap record profits; holding a virtual monopoly on the organic grocery business.

Whole Foods founder John Mackey is a self-proclaimed disciple of Milton Friedman and his extreme free market theories of economics.  The “Benefits Vote” is proof that the current Board of Directors has been hand-picked because they agree with Mackey’s philosophy. The Board and Executives of WFM chose the well-being of investors and the stock market over the “happiness” of Team Members who create the wealth these investors (“stakeholders”) enjoy.  WFM could choose to make a slightly lower return on investment, have slightly lower growth in profits over the next three years, and hold the line on cutting benefits and pay to Team Members. But they didn’t. At a time when the economy is difficult for employees working every day just to make ends meet, WFM recognizes profitability and investment return over the day-to-day financial well-being of its Team Members. There will be denial of this fact from WFM leadership to be sure, but the facts are undeniable. WFM is in a position to maintain current benefit levels.

It is the choice of the Board and Executives not to do so. The labor struggle in Wisconsin is the most critical in out lifetime. It will determine whether workers have a place at the table to help determine the conditions they work in; or they will be indentured servants – working only at the behest and whim of the few that control capital, and subsequently workers’ lives. The farce that is being put on as “choice” by Whole Foods in the “Benefits Vote” is no choice, and is no vote. They are being asked to choose which finger to sever – and that is no choice.

This message should be sent to every public and private union worker in America. Beware “right to work” – it is no right at all – only to live as a slave to capital.