Required Course MaterialsRead Ch. 2, Stakeholder Relationsh.docx

Required Course Materials
Read Ch. 2, “Stakeholder Relationships, Social Responsibility,
and Corporate Governance” of Business Ethics.
Read the following sections of Conscious Capitalism:
• Ch. 3, “Purpose: The Corporation’s Search for
Meaning”
• Ch. 4, “Discovering the Growing Purpose”
Title: Business Ethics: Ethical Decision Making and Cases
Edition: 11th
Authors: Ferrell, O. C., Fraedrich, J., & Ferrell, L.
ISBN-13: 9781305500846
Title: Conscious Capitalism: Liberating the Heroic Spirit of
Business
Authors: MacKay, J., & Sisodia, R.
ISBN-13: 9781422144206
Bias in Decision Making
Purpose:
The purpose of this assignment is for you to demonstrate an
understanding of how bias affects the way people make
decisions. The project is specific to business and illuminates the
seriousness of the effect that bias can have on a business
decision.
In this project, you will demonstrate research and writing skills,
the ability to identify and use primary and secondary source

material, use critical thinking skills in the application of bias to
the decision and use APA to support ideas, reasoning, and
conclusions presented in the project.
Outcomes:
· Identify various bias types
· Explain how bias effects decision making
· Develop research skills in the identification and retrieval of
relevant information in the completion of the assignment
· Develop critical thinking and communication skills
Instructions:
You will read the following article that depict some of the worst
business decisions in the last century. Once you read the
article, select two of the decisions. You will then thoroughly
research each decision. To thoroughly research the decisions,
you will closely and carefully review as many sources as
possible to discover the facts of the decision making process.
One to three sources probably will not lead to gaining a
thorough understanding of the bad decision.
Seemed Like a Good Idea at The Time.
Once you have gathered the research, follow the steps below:
Step 1: Write an Introduction
Create the introductory paragraph. The introductory paragraph
is the first paragraph of the paper and tells a reader the main
points covered in the paper. To help you know how to write an
introduction, view this website to learn how to write an
introductory
paragraph: http://www.writing.ucsb.edu/faculty/donelan/intro.h
tml
Step 2: The Decision and Associated Biases
Now it is time to use the research to answer the following
requirements:

· Select two bad decisions and briefly describe the decisions
· In detail, explain why and how the bad decision was made
· Identify all of the biases that led to the bad decision (Please
note that hindsight bias does not apply since you are looking for
biases that led to the decision)
· Define each of the identified biases
· Explain how and why the bias(es) impacted the decision.
Explain your reasoning for the selection and explain what led
to the conclusion that these particular bias were at play?
· What was the outcome of the bad decision? What was the
impact on the stakeholders?
· In addition to using a wide array of the course material and
secondary sources from your research, use at least one primary
source for each decision that the research revealed. Primary
sources could include an interview with the decision maker,
historical or legal documents, eyewitness accounts, statistical
data, audio or video recordings, or speeches. For instance, if
you choose Ross Perot’s pass on Microsoft be sure to use a
quote from Perot himself about the choice that supports the
identification of the bias. To learn about primary sources versus
secondary sources, read
https://library.ithaca.edu/sp/subjects/primary.
Step 3: Write a summary paragraph
Step 4: Submit the paper in the Assignment Folder (The
assignment submitted to the Assignment Folder will be
considered the team’s final product and therefore ready for
grading by the instructor. It is incumbent upon the student to
verify the assignment is the correct submission. No exceptions
will be considered by the instructor).
===========================
Preparation for Writing the Assignment
Before you begin writing the paper, you will read the following

requirements that will help you meet the writing and APA
requirements.
· Read the grading rubric for the assignment. Use the grading
rubric while writing the paper to ensure all requirements are
met that will lead to the highest possible grade.
· Third person writing is required. Third person means that
there are no words such as “I, me, my, we, or us” (first person
writing), nor is there use of “you or your” (second person
writing). If uncertain how to write in the third person, view this
link: http://www.quickanddirtytips.com/education/grammar/firs
t-second-and-third-person.
· Contractions are not used in business writing, so you are
expected NOT to use contractions in writing this assignment.
· You are expected to paraphrase and NOT use direct quotes.
You are expected to paraphrase, which can be learned by
reviewing this
link: https://writing.wisc.edu/Handbook/QPA_paraphrase2.htm
l.
· You are responsible for APA only for in-text citations and a
reference list.
· The expectation is that you provide a robust use of the course
readings to support ideas, reasoning and conclusions.
· You may not use books as source material.
· When using a source document, the expectation is that the
information is cited and referenced with a page or paragraph
number. Note that a reference within a reference list cannot
exist without an associated in-text citation and vice versa.
How to Set Up the Paper
Create a Word or Rich Text Format (RTF) document that is
double-spaced, 12-point font. The final product will be between
3-5 pages in length excluding the title page and reference page.
Write clearly and concisely.
The body of the paper should consist of a heading for each of

the decisions chosen.
APA and writing is a main focus of this paper and should be
executed with the utmost attention to detail. In this regard, note
that the project calls for at least one primary source. Be sure to
include this as part of your supporting material choices. Should
you need help in any these areas of APA or writing, please ask
the professor for guidance.
Use the grading rubric and instructions as guides. Be sure to
cover all that is asked of you in the assignment and do so in a
way that will guide the professor into giving a high grade.
Finally, all work that you submit for this project should be your
own. Remember your pledge to uphold academic integrity in all
work that you prepare and submit.
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CASE 13 Whole Foods Strives to Be an Ethical Corporate
Citizen*
In a period of time when green is on everyone’s mind, it
seems fitting that Whole Foods Markets are popping up with
their distinctive green signs in neighborhoods across the
country. Beginning with their first expansion in 1984, Whole
Foods has consistently grown domestically. In 2007 Whole
Foods began opening stores in the United Kingdom. While
continually opening new stores, the company has fueled its
expansion by acquiring other food chains as well. For instance,
it acquired one of its largest competitors—Wild Oats—in 2007,
and in 2014 purchased four New Frontiers Natural Marketplace
stores. The company currently has more than 400 stores located
throughout the United States, Canada, and the United Kingdom.
Whole Foods consistently ranks as one of the World’s Most
Ethical companies because of its emphasis on organic food,
healthy living, customer satisfaction, quality, and sustainability.
The firm has also been elected as one of Fortune’s top 100
companies to work for every year since the list was created in

1998. Although customers are considered to be the company’s
highest valued stakeholder, Whole Foods adopts a stakeholder
orientation that focuses on the needs of all of its stakeholders,
including its employees and the community. Whole Foods
spearheaded efforts in the grocery industry to source its food
products responsibly and search for innovative solutions to
improve its environmental footprint. The company emphasizes
healthy living and seeks to contribute to the communities where
it does business. However, despite Whole Foods’s significant
accomplishments in business ethics, it has not been free from
criticism. In pursuit of growth, it has been accused of running
local stores out of business and received mixed responses from
some consumers. Other ethical issues include antitrust
investigations and questionable activity by co-CEO John
Mackey. This case begins by providing brief historical
background information on Whole Foods. Next, its mission and
values are examined, followed by a look at how the company
strives to live out its values to become a good corporate citizen.
We also consider ethical issues Whole Foods has faced to
demonstrate the complexity companies may experience when
engaging in ethical decision making. *This material was
developed by Casey Caldwell, Erica Lee Turner, and Jennifer
Sawayda under the direction of O.C. Ferrell and Linda Ferrell.
Julian Mathias provided editorial assistance. This case is
intended for classroom discussion rather than to illustrate
effective or ineffective handling of administrative, ethical, or
legal decisions by management. All sources for this case were
obtained through publicly available material © 2015.
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In 1978 two entrepreneurs in their twenties used a
$45,000 loan to open a small natural foods store in Austin,
Texas. John Mackey and his then-girlfriend Rene Lawson Hardy
wanted to help people live better. At the time, there were fewer
than a dozen natural foods markets in the nation. The couple
named their business SaferWay as a spoof on Safeway. The
entrepreneurs had a rocky start. At one time they used the store
as a residence after being kicked out of their apartment for
storing food products. After two years Mackey and Hardy
agreed to merge SaferWay with Clarksville Natural Grocery,
owned by Craig Weller and Mark Skiles. The newly merged
company called themselves Whole Foods Market. The company
continued to face challenges. Less than a year after opening, a
devastating flood hit Austin, wiping out Whole Foods’s
inventory. With no insurance and $400,000 in damages, the
company’s future looked dire. Yet with the help of the
community, the store reopened four weeks after the flood. In
1984 the company expanded into Houston and Dallas. Four
years later they acquired a store in New Orleans, followed by
one in Palo Alto, California, a year later. The company
continued to grow during the 1990s as Whole Foods merged
with over a dozen smaller natural groceries across the nation.
Whole Foods continued to thrive in the early twenty-first
century and today earns more than $14 billion in revenue, owns
more than 400 stores, and employs more than 87,000 workers
(compared to nineteen workers in 1980). John Mackey continues
to lead Whole Foods as the company’s co-CEO. From the onset,
Mackey desired to create a company that incorporated the
values of healthy living and conscious capitalism. Conscious
capitalists believe “that a new form of capitalism is emerging
that holds the potential for enhancing corporate performance
while simultaneously trying to advance the quality of life for
billions of people.”1* For Mackey, businesses should seek to
balance the needs of all stakeholders rather than simply try to
earn a profit. As a result, Whole Foods places the customer as
first priority. The company adopted criteria such as the Whole

Foods Trade Guarantee and the Eco-Scale Rating system to
ensure customers receive the highest quality organic products.
Although Whole Foods sells a number of brands, it also sells its
own private labels including its 365 Everyday Value and Whole
Market. Its 365 Everyday Value private brand comprises 2,600
products that are targeted toward customers who desire high-
quality organic food but who also wish to save money. Because
organic food usually costs more, the 365 Everyday Value is
meant to appeal to more budget-conscious consumers. However,
although Whole Foods recognizes the importance of customers,
it also considers the health and well-being of its other
stakeholders, including employees and communities. Its mission
statement consists of three goals: (1) whole foods, (2) whole
people (3) and whole planet. According to its mission statement,
Whole Foods has adopted a stakeholder orientation to guide its
activities. This approach, along with a strong adherence to its
core values, has been crucial in establishing Whole Foods’s
reputation as a firm committed toward benefiting stakeholders.
1 “What is Conscious Capitalism®?”
http://consciouscapitalism.org/learnmore/ (accessed September
29, 2015).
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Whole Foods’s core values, described in Table 1, are an
outreach of its mission statement. Whereas the mission
statement provides a general direction, Whole Foods’s values
gives additional details about how it is turning its mission into a
reality. The core values also provide an idea of how Whole
Foods ranks certain stakeholders. Whole Foods calls the
company values its Declaration of Interdependence to
emphasize how interdependent the company is upon its
stakeholders. The first two values involve meeting customer
needs. Whole Foods describes its commitment toward selling

the highest quality natural and organic products available as
attempts to be buying agents for customers and not selling
agents for manufacturers. Next, Whole Foods turns its attention
to the happiness of its employees. Whole Foods believes
satisfying customers and employees creates wealth for
shareholders. Communities, the environment, and suppliers are
essential stakeholders for Whole Foods and are included in its
value statements. It is clear from Whole Foods’s core values
that the company strives toward a stakeholder orientation as
part of its core business practice. TABLE 1 Whole Foods
Market’s Core Values We Sell the Highest Quality Natural and
Organic Products Available We Satisfy, Delight, and Nourish
Our Customers We Support Team Member Excellence and
Happiness We Create Wealth through Profits and Growth We
Serve and Support Our Local and Global Communities We
Practice and Advance Environmental Stewardship We Create
Ongoing Win-Win Partnerships with Suppliers We Promote the
Health of Our Stakeholders through Healthy Eating Education
Source: Whole Foods, “Our Core Values,”
http://www.wholefoodsmarket.com/mission-values/core-values
(accessed February 20, 2015). LIVING ITS VALUES The
success of Whole Foods can be credited to the fact that it
modeled its operations around its key stakeholders. Mackey’s
vision of a model company was one that earned a profit while
also acting as a responsible corporate citizen by benefitting
society. This vision turned Whole Foods into one of the most
successful organic grocers in the world. The following section
delves further into how Whole Foods meets the needs of its
customers, employees, communities, and the environment.
Commitment to Customers Because customers are the highest
priority at Whole Foods, the company adopted a number of
strategies to meet the needs of this stakeholder group.
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For instance, Whole Foods retail stores maintain an
inviting environment, complete with eateries and tables both
inside and outside the store for visitors to dine. Free sampling is
common at Whole Foods locations to allow customers to try the
products. Additionally, employees are instructed to treat
customers like a valued part of the family. In 2014 the company
introduced a customer reward program with the goal of
becoming more competitive with retailers offering frequent
sales and item discounts. For the first time since its inception,
Whole Foods has also started running TV and print ads, which
has significantly increased the firm’s yearly advertising
expenditure but is also helping the grocery store chain attract
and retain more customers. The ads are focused on redefining
Whole Foods as a company that cares about the entire life cycle
of the products it sells. Whole Foods is hopeful that its new
advertising and in-store discounting strategy will help it move
beyond the satirical “whole paycheck” reputation that is still
prominent in many consumers’ minds because of Whole Foods’s
pricier products. The company also builds customer
relationships through the use of social media. Whole Foods
actively uses Twitter and Facebook accounts to post information
on sales, answering customer concerns, providing articles or
tips about healthy eating, and even retweeting information from
food experts. Each Whole Foods location has a social media
presence, including dedicated social media pages for some store
departments. This targeted approach allows Whole Foods to
connect with customers and address concerns in real-time.
Additionally, the company has worked on making its website
more user friendly and adding features that encourage online
purchases and in-store pickups. For instance, Whole Foods
partnered with a grocery delivery service called Instacart, which
offers home delivery of items purchased online. Implementing
this delivery service is likely a move to offset the convenience
that Amazon.com offers its “Prime” subscribers who get free
twoday shipping (or same day delivery in select cities) on many

grocery items. Whole Foods’s customer-centered focus has paid
off. In the American Customer Satisfaction Survey, Whole
Foods was voted second highest from 2010 to 2012 in the
supermarket category after Publix. Whole Foods largely
differentiates itself from its rivals by emphasizing quality over
price. As consumers become more health-conscious and the
trend toward organic food continues, Whole Foods has become
well suited to attract this demographic. To reassure consumers
its products are of the highest quality, Whole Foods offers a
number of quality standards. Its Whole Trade Guarantee
maintains that the company only purchases products that meet
the following criteria: • Meet its quality standards. • Provide
more money to producers. • Ensure better wages and working
conditions for workers. • Utilize sound environmental
practices.2 * QUALITY STANDARDS Whole Foods compiled a
list of standards to guarantee the highest quality for the organic
food it sells. The company works to eliminate all genetically-
modified products in stores whenever possible. It features foods
free of artificial preservatives, colors, flavors, sweeteners, and
hydrogenated fats. Its private labels are also free of high
fructose corn syrup, thought to be a big ingredient contributor
to obesity in America. 2Whole Foods Market IP, L.P., “Our
Whole Trade Guarantee®,” 2011,
http://www.wholefoodsmarket.com/ products/whole-trade.php
(accessed July 16, 2012).
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One way that Whole Foods differentiates itself from
competitors is alerting customers to the presence of genetically-
modified foods. If the company cannot find a product that is not
genetically modified, then the product is labeled to inform
customers they are buying something that is not completely “all
natural.” Unlike some countries in Europe that require GMO

labeling or ban GMO products altogether, the United States
requires no such labeling. However, Whole Foods voluntarily
provides GMO labeling information to consumers even though
there is no law in the United States requiring it. The company
has also committed to labeling all GMO food products it sells
by 2018, although many items are already labeled. This
commitment demonstrates the company’s intent to reduce or
eliminate genetically-modified products from all parts of the
supply chain. Although GMO labeling might dissuade customers
from purchasing a particular product, it also gives Whole Foods
a competitive advantage because customers can trust the
company to be truthful. Customers tend to do more business
with companies they trust, and Whole Foods’ sixth place
position on the American Customer Satisfaction Index for
supermarkets indicates the firm has indeed reaped the rewards
of high customer trust. ECO-SCALE™ RATING SYSTEM
Another set of quality standards Whole Foods has adopted
pertains to the cleaning supplies it sells. Whole Foods uses what
it terms the EcoScaleTM Rating System to inform users about
the safety and the environmental impact of the cleaning
products sold in its stores. According to Whole Foods, the Eco-
Scale Rating System is the first such rating system for cleaning
supplies sold in retail stores. To develop these standards, Whole
Foods used a third-party audit system as a way to eliminate
bias. The rating system separates products into red, orange,
yellow, or green categories. Products classified in the red
category are not sold at Whole Foods because they do not meet
the company’s safety and environmental standards. Products in
the orange category appear to be “safe” with no significant
safety and environmental concerns and no animal testing. Those
in the yellow category meet all the standards of the orange
category and take further steps to be environmentally friendly.
For instance, products in this category do not have synthetic,
petroleum-based thickeners from nonrenewable resources.
Products in the yellow category do not contain any ingredients
with moderate environmental concerns, and those in the green

category are considered to be the safest and most eco-friendly.
These products do not have any petroleum-based ingredients but
are made with plant- and mineral-based ingredients. Products in
all of these categories have the ingredients labeled on the
packaging and receive third-party verification, allowing
consumers to make more informed decisions about which
cleaning products to purchase. Because Whole Foods’s
reputation depends upon the organic and green claims of its
products, this Eco-Scale Rating System and the company’s
Quality Standards ensure the truthfulness of its product quality
claims. Commitment to Employees If customers are the highest
priority stakeholder at Whole Foods, then employees come as a
close second. Whole Foods consistently ranks as one of the
“Best Companies to Work For” in Fortune magazine, and the
company is committed to ensuring equality among its
employees. At a time when executive pay has been highly
criticized in proportion to employee salaries, Whole Foods
capped the pay of its executives at 19 times the companies’
average full-time employee salary. Co-CEO John Mackey takes
$1 per year in compensation. Employees receive 20 percent
discounts on company products, and Whole Foods members that
work at least 30 hours a week are eligible for health care
coverage.
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Employees who work between 20 and 30 hours a week can also
receive health coverage after working a certain number of
service hours. When employees work 6,000 service hours, they
are eligible for stock options, providing them with a stake in the
company. While Whole Foods desires for its customers to live
healthy lives, it also desires the same for its employees. The
company began the Team Member Healthy Discount Incentive
Program to reward employees for living healthy lifestyles.

Employees that meet certain benchmarks in cholesterol level,
blood pressure, not smoking, and body mass index are eligible
for an additional 10 percent discount on Whole Foods
purchases. Additionally, Whole Foods is known for its
diversity. Forty-five percent of the Whole Foods workforce
consists of minorities, with nearly the same percentage
consisting of women. Whole Foods also offers domestic-partner
benefits to same-sex couples. Whole Foods’s treatment of its
employees results in a low voluntary turnover rate of 9 percent,
versus an average turnover rate of about 100 percent for the
industry. While Whole Foods cares for its employees, it also
realizes happy employees translate into happier customers—and
higher profits. Yet Whole Foods does not seek to empower
employees simply through benefits. It also uses the talents of its
employees to improve company operations. Self-directed work
teams consisting of employees make many of the day-to-day
operational decisions at the store level. For instance, teams can
be part of the new employee hiring process, in addition to
having some control over their own scheduling. New team
members are elected onto the team by two-thirds of a vote. The
company provides its team members with extensive training and
resources including an online site called “Whole Foods
University” that provides educational information on many
aspects of the Whole Foods business. Courses provided through
Whole Foods University range from information on the
company’s gain sharing program to the company’s quality
standards. By empowering its employees through teams, perks,
and education, Whole Foods has been able to turn its workforce
into significant contributors of value for the company.
Commitment to Other Stakeholders As Whole Foods
demonstrates with its values, consumers and employees are not
the only stakeholders the firm recognizes as important. Its
fourth value includes creating wealth through profits and
growth, which is essential for any organization to survive. The
more profit Whole Foods is able to generate, the better financial
return for Whole Foods stockholders and investors. Whole

Foods believes meeting the needs of consumers and employees
translates into more wealth for its investors. Such a stakeholder
orientation recognizes the interconnectedness of all the
companies’ stakeholders. Whole Foods has averaged 12 percent
sales growth each year from 2011 to 2014, and its 2014 net
income of $579 million jumped 235 percent from its 2010 net
income. This growth is important since most grocery stores have
experienced declining growth in recent years. Whole Foods’s
profitability demonstrates the company can succeed with a
socially responsible focus on organic foods and quality
standards. Whole Foods strongly believes in giving back to the
global community, and this is perhaps best emphasized through
its Whole Planet Foundation established in October 2005. The
Foundation was created with the mission to create economic
partnerships with the poor in developing-world communities.
Rather than simply providing immediate items such as food or
clothing, Whole Foods creates strategic partnerships with
microfinance institutions. Microfinance provides small loans,
typically $200 or less, to entrepreneurs in developing countries
wanting to start their own small businesses. The company’s first
grant in 2006 helped develop a microfinance program in Costa
Rica. Consumers and employees Copyright 2017 Cengage
Learning. All Rights Reserved. May not be copied, scanned, or
duplicated, in whole or in part. Due to electronic rights, some
third party content
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interested in donating can do so on the Foundation’s website.
The foundation has raised $53.3 million since 2005, with Whole
Foods suppliers contributing over $6 million. On a more local
level, Whole Foods also established the Whole Kids Foundation.
The Whole Kids Foundation was founded with the mission to
improve the nutrition of children. The company partners with

schools and other organizations to increase children’s access to
healthier food. Company partnerships include the LunchBox
Project, an online resource providing information for schools
that want to increase their offerings of healthy food served in
cafeterias, and the Let’s Move Salad Bars to Schools Initiative
that provided funds to increase the number of salad bars in
schools across the United States. As a grocery store committed
to selling healthy and organic foods, Whole Foods has been able
to link its philanthropic endeavors to its value of supporting
stakeholder health through healthy eating education. In terms of
supplier partnerships, Whole Foods partners with local farmers
to offer a variety of produce. Whole Foods is committed to
sourcing from local farmers that meet its quality standards,
particularly from organic farmers who engage in sustainable
agriculture. To qualify as local, food products must have
traveled less than seven hours by car or truck to the store.
Everyone of Whole Foods’s 11 regions has guidelines about
how to use the term “local” in their stores, and some stores have
chosen to adopt stricter criteria for local products by lessening
the travel time. Whole Foods believes that sourcing locally
grown produce embodies its values of giving back to the
community, contributing to sustainability, and offering
consumers a variety of high-quality product choices. For
instance, because there is less of a need to package and
transport products for long distances, local farmers can make
more money, which they in turn can use to stimulate local
economies. Additionally, Whole Foods states that support for
local farmers encourages them to diversify, which increases
Whole Foods’s product selection and contributes to biodiversity
in the environment. Transporting products shorter distances also
reduces the greenhouse gas emissions released from vehicles.
These win-win relationships with farmers help Whole Foods
“give back” to its suppliers and to the environment. Finally,
although not specifically mentioned in its values statement,
Whole Foods also considers the concerns of special interest
groups. Whole Foods became the first large supermarket to

adopt humane animal treatment standards for the meat products
it sells. In developing these standards, Whole Foods discussed
ideas with animal rights special interest groups to decide
criteria for sourcing its meat products. Many companies pay
little attention to special interest groups because they are
considered secondary stakeholders. In other words, they are not
necessarily required for the company’s survival. However,
Whole Foods realized that collaborating with special interest
groups would not only secure their support but also provide an
opportunity for input on how the company could improve its
practices to become more socially responsible. Whole Foods
representatives met with members from special interest groups,
farmers, and animal experts to determine humane animal-
treatment standards species by species. The company eventually
created a supplier certification program in partnership with the
Global Animal Partnership to ensure its suppliers were adhering
to company standards. The idea behind this program is not only
to ensure compliance, but also to inform consumers about the
meat they are purchasing. For this reason, Whole Foods adopted
a ranking system consisting of five steps. Step 1 assures
consumers that the animal lived outside of a crate or cage. Step
2 indicates that the farm provided some type of enrichment for
the animal. Step 3 indicates that the animal had access to the
outdoors, and Step 4 means the animal was free to roam or
forage when outdoors. Step 5 means the animal lived its
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entire life with all the body parts it was born with. It is also
possible to achieve a Step 5+ ranking, indicating the animal met
all the five standards in addition to spending its entire life on
one farm. Whole Foods also introduced the similar “responsibly
grown” rating system that ranks produce based on whether
pesticides were used by the farmer. A “best” label indicates that

a number of pesticides designated by Whole Foods were not
used in the produce cultivation process. These ranking systems
reiterate Whole Food’s concern for the environment as well as
consumer choice. Commitment to Sustainability Last but not
least, Whole Foods is strongly committed to the environment.
We have already seen how Whole Foods strives to reduce its
environmental impact by selling organic food, sourcing from
local farmers, selling eco-friendly products, and reducing
transport times for its products. However, Whole Foods also
strives to incorporate green practices at an operational level as
well. The firm is invested significantly in renewable energy,
such as solar, wind power, and biodiesel. On the other hand,
this does not necessarily mean Whole Foods relies solely on
renewable energy sources—the company continues to use
conventional electricity as it is difficult for any large firm to
use 100 percent renewable energy. Instead, in 2006 Whole
Foods decided to purchase wind energy credits to offset its
nonrenewable energy use. This money goes to fund renewable
energy projects associated with wind farms. Some Whole Foods
stores purchased solar energy installations to power their
facilities. A solar energy installation can prevent 1,650 tons of
carbon dioxide from being emitted into the atmosphere. The
company also began using biodiesel fuel in its trucks and
modified some of its truck designs to cut back on wind
resistance, which in turn conserved fuel. The trucks are
equipped with a fuel-saving system that allows the engines to
turn off completely when products are being loaded or
delivered, which saves fuel that would have been expended if
the trucks were left idling. The firm began to obtain Leadership
in Energy and Environmental Design (LEED) certification for
some of its stores, meaning the stores adhere to strict
environmental standards and are constructed with more
ecofriendly building materials such as recycled wood. Whole
Foods embraces the concept of Reduce, Reuse, and Recycle in
its stores. The company does not use plastic bags and
encourages its customers to use renewable grocery bags when

shopping. As an incentive to reduce shopping bag consumption,
the stores provide a nickel refund to those who come with
renewable shopping bags. The stores also use recycled paper
when printing and have begun to use rechargeable batteries to
cut down on the waste that results from the disposal of
batteries. To reduce its energy use even further, Whole Foods
began to replace its paper and plastic food containers and
utensils with allfiber packaging. Finally, Whole Foods is
continuing to work on selling products that are not only good
for consumers but are more beneficial toward the environment.
For instance, the company pledged to support more sustainable
sourcing of palm oil, which has traditionally been a strong
contributor to deforestation in some countries. Perhaps one of
its biggest landmark commitments, however, is a dedication to
seafood sustainability. Whole Foods was the first grocery chain
to adopt a sustainability program for wild-caught seafood.
Because overfishing has become a substantial problem, Whole
Foods implemented a three-color labeling system to help
consumers make informed decisions. Red labels are a sign that
the seafood should be avoided because it harms the
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Case 13: Whole Foods Strives to Be an Ethical Corporate
Citizen 545 environment or other marine life. Whole Foods has
also developed standards for farmed seafood to make sure the
fishes are being harvested responsibly. ETHICAL ISSUES It is
obvious Whole Foods has made great strides in social
responsibility. By adopting a stakeholder orientation, Whole
Foods has received recognition for ethical business practices,
environmental responsibility, and customer satisfaction.
However, no company can avoid ethical issues completely, and
even those that are the highest rated in social responsibility can

make mistakes. The bigger the organization, the more ethical
risks it assumes. As Whole Foods grew, it encountered several
ethical issues that needed to be addressed. The following
section describes some criticisms and legal issues that Whole
Foods has faced, some of which represent risk areas for the
company. Reaction toward Competitors In its more than 30
years in existence, Whole Foods grew significantly from its
humble origins. Some of this growth came from acquiring other
stores and caused criticism from those not wanting their smaller
community grocery stores to shut down or be acquired. For
instance, in the Jamaica Plain neighborhood of Boston, Whole
Foods acquired a local Latin American store called Hi-Lo when
it moved into the community. Many local residents objected,
considering Whole Foods products to be too expensive. Most
large retail chains must exert caution when moving into a new
community since their arrival will almost inevitably have an
impact on rival, and often smaller, retailers. While not all its
acquisitions went smoothly, Whole Foods had perhaps the most
trouble when it wanted to acquire its competitor, organic
grocery chain Wild Oats. Wild Oats was the second largest
natural grocery chain in the country, and in 2007 Whole Foods
announced it was acquiring its largest competitor for $565
million. This acquisition eliminated a key competitor and gave
Whole Foods access into new markets. However, the proposed
acquisition generated immediate controversy—this time from
regulators. The Federal Trade Commission filed a lawsuit to
block the acquisition, claiming it would reduce competition in
the industry and thus violate antitrust laws. Cited in the
complaint were emails from CEO John Mackey stating a merger
between the two companies would help avoid “price wars.”
(Price wars often happen when two close competitors try to
outdo one another and gain market share.) This was another sign
that perhaps Whole Foods wanted to gain a strategic advantage
from less competition. The FTC also revealed that John Mackey
wrote blog posts under a pseudonym between 1999 and 2006
that highly criticized Wild Oats. These postings included

several negative comments about Wild Oats’s stock prices and
its future. While not illegal, many believed these postings were
unethical and even manipulative. Whole Foods made sure to
distance itself from John Mackey’s postings by stating they
were done outside of the company. However, as the voice of the
company, Mackey’s actions brought up serious questions about
how Whole Foods approaches competing companies.
Eventually, the FTC and Whole Foods reached a deal. Whole
Foods agreed to sell 31 Wild Oats stores and sell the Wild Oats
brand. Mackey acknowledged the company would have been
better off if it had not pursued the merger, particularly as drops
in stock prices and the recession caused so much damage. In
fact, both Mackey and co-CEO Walter
Page 546
Citizen*
Robb admit that Whole Foods’s rapid expansion and inability to
anticipate and respond to changing retail trends nearly crippled
the company. During the 2009 recession, Whole Foods’s stock
price dropped from $30 to $4 a share. Although the company
recovered (with the stock price ranging from $30–$57 a share in
2015), it is important for Whole Foods to approach future
acquisitions and relationships with rivals carefully with respect
to laws and ethical considerations. Veering Off-Course In 2009
in the midst of a recession and a resolution with the FTC over
the acquisition of Wild Oats, John Mackey admitted Whole
Foods had strayed from one of its core values: healthy eating. In
an interview, Mackey admitted, “We sell a bunch of junk.” He
said Whole Foods had “veered off-course” by selling junk food
and unhealthy products to consumers. Part of the reason to stock
shelves with less healthy alternatives was most likely to court

consumers, particularly with the increase in competition.
Competition from Trader Joe’s and Costco had already led
Whole Foods to modify some of its strategies, such as matching
Trader Joe’s prices on 365 Everyday Value items. However,
companies begin to encounter problems when they stray from
their corporate values, and Mackey appeared to think Whole
Foods was not being a leader in promoting healthy eating
habits. After this admission, Whole Foods re-committed to its
value of healthy eating education. The company hired Healthy
Eating Specialists and began posting information on its website
to educate consumers on healthy eating. The company created
incentives for its employees to adopt healthier lifestyles, as
described earlier. By proactively engaging in the fight against
obesity, Whole Foods began to re-embrace its original core
values. In 2015 Whole Foods’s stock dropped more than 30
percent after the New York City Department of Consumer
Affairs found the company was overstating the price of pre-
weighed packages. Whole Foods’s CEOs admitted to
overcharging and apologized. Nevertheless, there was much
negative publicity across the country about the incident. The
CEOs claimed that overcharging was a mistake that involved
both overcharging and undercharging. If the priced item was not
in the consumer’s favor, they promised to give them the item
for free. Unions, Health Care, and Climate Change It is no
secret that Whole Foods prefers not to have unions. Mackey has
cited unions as creating “an adversarial relationship in the
workplace.” However, he maintains that managers cannot stop
employees from unionizing if they so desire. Some disagree and
have accused Whole Foods of union-busting by threatening
reprisals if employees join a union. For example, Whole Foods
joined with Starbucks and Costco to oppose the proposed
Employee Free Choice Act that gives employees the ability to
form unions if a majority signs cards suggesting they desire to
have a union. The three retailers instead advocated for a secret
ballot process for unionization. While it is not necessarily
unethical to be against unions, union busting—or purposefully

trying to prevent unions by threats or other underhanded
tactics—has ethical and legal implications. Whole Foods should
remain vigilant to ensure store managers and other officials
respect employee rights to organize. Health care is another
debate, but not because Whole Foods has a bad health care
program for employees. Rather, the controversy stemmed from
an op-ed article Mackey wrote against President Obama’s
universal health care plan. It might be argued that since Mackey
wrote the article, Whole Foods should not be dragged into the
controversy.
Page 547
Citizen*
However, once again because founders and/or CEOs represent a
company, society often associates their actions as speaking for
the firm, even if an action was done outside of it. In this case,
Mackey, a strong libertarian, wrote an op-ed article in The Wall
Street Journal criticizing Obama’s health care initiative and
proposing alternatives for health care reform, using Whole
Foods’s health care plan as an example. For instance, Whole
Foods provides up to $1,800 of funds per year for employees to
use for medical care. Money not spent rolls over into the next
year. Afterward, Whole Foods will not cover the insurance costs
until the employee meets a $2,500 deductible. According to
Mackey, this encourages employees to spend the first $1,800
carefully and provides them with the opportunity to determine
what their health care needs are. Mackey’s letter led to anger
from supporters of the nationalized health care initiative. Some
unions and consumers began to boycott Whole Foods’s stores
because of Mackey’s stance, claiming he sees health care as a
privilege and not a right. Others, however, refused to boycott
even though they disagreed with Mackey’s views. They believed
Mackey—and Whole Foods—had the right to express their

opinions. Regardless, Whole Foods’s sales did seem to be
somewhat affected by Mackey’s controversial remarks. Mackey
stirred more sentiment a few years later for allegedly
downplaying the dangers of global warming. He mentioned that
climate change is a normal process that should not be used as an
excuse to curb economic growth. Mackey went on to say that
society would learn to cope and adapt to rising temperatures and
climate change is not as big of a deal as it has been made out to
be. This is an interesting ethical issue, not because it had a
drastic impact on Whole Foods’s bottom line but because it
brings up the issue of businesses’ and business representatives’
rights to express their viewpoints—particularly in the political
limelight. These ethical issues are not always easy to settle and
continue to be relevant for businesses that have major stakes in
regulatory decisions. CONCLUSION Whole Foods strives to be
a profitable company while also maintaining an ethical
standpoint when making decisions related to its customers,
employees, and all affected stakeholders. Consistently being
ranked as one of the World’s Most Ethical companies and best
companies to work for, Whole Foods has demonstrated its
commitment toward selling organic food, satisfying customers,
and incorporating quality and sustainability into its products.
Whole Foods evaluates all of the products it sells so it can more
effectively educate customers about what they are buying and if
it meets certain quality standards. The company has continually
demonstrated its commitment to the environment by
implementing the Eco-Scale Rating System, aggressively
promoting the use of renewable shopping bags, and beginning to
obtain LEED certification for some of its stores. Whole Foods
strives to make a beneficial impact within each community it
operates in by adopting a stakeholder orientation. These actions
contribute to Whole Foods’s current status as one of the top
natural grocers in the United States. However, as Whole Foods
expands, it faces many ethical challenges, some of which may
extend into the future. For example, when opening new stores
the company must anticipate the reactions from community

members and attempt to alleviate any concerns. It also needs to
continuously reexamine its expansion and acquisition strategy
to ensure that pursuing the ventures will not run afoul with
regulatory authorities, as it experienced with its unprofitable
acquisition of Wild Oats. Finally, Whole Foods must continue
to take Copyright 2017 Cengage Learning. All Rights Reserved.
May not be copied, scanned, or duplicated, in whole or in part.
Due to electronic rights, some third party
Page 548
Citizen*
a stakeholder orientation toward all stakeholders—even
competitors. It is important for the firm to realize that just
because an action might not be illegal does not mean that it is
necessarily ethical. Although Whole Foods has experienced
some negative backlash, overall the company has developed a
strong positive reputation among its stakeholders. As a desire
for green product options and a concern for corporate social
responsibility continually evolve among stakeholders, Whole
Foods’s careful attention to stakeholder needs and a strong
commitment to core values provide it with a significant
competitive advantage. QUESTIONS FOR DISCUSSION 1.
How has a commitment to corporate values contributed to
Whole Foods’s success? 2. Describe how Whole Foods’s
adoption of a stakeholder orientation has influenced the way it
operates. 3. What are some ways that Whole Foods might have
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Page 549
Citizen*
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I Follow Whole Foods,” Social Media Today, May 7, 2012,
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http://www.businessinsider.com/more-bad-news-for-whole-
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Bloomberg, March 22, 2009,
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Foods Market, “Health Starts Here,” 2015,
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company on FORTUNE Magazine’s ‘100 Best Companies to

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Ferrell, O. C.; John Fraedrich; Linda Ferrell. Business Ethics:
Ethical Decision Making & Cases (Page 550). South-Western
College Pub. Kindle Edition.
Case Study – Whole Foods
Answer the following questions related to Case 13 in Business
Ethics in a 2-page essay:
• For many people, work is generally regarded as a
daily grind—a necessity but not a passion. Why do you think
this is so? What would it take to change that perspective?
• The CEO of Whole Foods, John Mackey, has become

a role model for conscious capitalism. He integrates his heart
with his head by developing self-awareness and emotional
intelligence and by empowering others to do the same. Without
naming names or identifying company names, describe someone
you observed or worked for who strives to be this kind of role
model.
• Identify three businesses that adopted conscious
capitalism in terms of how they treat their employees and other
stakeholders.

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