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January 02, 2005

Come on, Whole Foods

Over the weekend, the Financial Times had a piece on Whole Foods Market - I can't link to the article, but I'm not going to use much of it anyway. For those who don't know, Whole Foods is a high end grocer here in the US that sells a mixture of organic and other distinctive goods. While there's a lot of pretension in both store and customer, I think the world is better off for Whole Foods being around. It might not be of much use in a place like New York City, but in a lot of other places it's the only source for a lot of interesting foods.

My point, though, isn't about the store but their CEO. In the FT profile, he claimed that even though Whole Foods is non-unionized in order to keep costs down, he's kept honest by the company's focus on "stakeholders" (including the employees and customers) and by the fact that his pay is capped at a limit of 14 times the lowest paid employee. Given the current vogue in corporate law to wring one's hands about executive compensation, that all seemed kind of fishy to me - rather like Whole Foods was trying a bit too hard. So I went poking about in the company's SEC proxy statement.

Now, I have no idea where Whole Foods got their 14 times lowest paid benchmark. But it does indeed exist. What also exists, however, is its limitation to cash compensation. The CEO can get paid any amount in stock options he wants. So yes, the $409,000 salary cap is pretty low, as things go, but it does nothing to limit management's pay. Who cares if salaries and bonuses have to be kept low? You can't get over a million in cash anyway without running into serious tax problems (corporations can't deduct anything more than $1 million in cash salary as a business expense).

When you look at stock options, however, the picture is totally different. This year, CEO Mackey 8,000 stock options, mixed between some that are slightly underwater and some at the current market price. Those are probably worth at least another $300,000. He's also got millions of dollars in previously vested stock options. On top of all that, he has a "golden parachute" that gives him a full year of salary and immediate vesting of all his options if the company is ever taken over. I've probably totally underestimated the amount of money he's being paid - sadly, my accounting skills are pretty lacking, and I haven't the time now to really look at this.

Do I mind what the man's being paid? No, of course not. I'm totally fine with him being paid any amount of money more than his worst paid employee, and screwing the unions, and doing whatever else need be done to produce money. That, after all, is his job. But he really needs to come off the white horse. In no sense, except a false one, is he really being paid "14 times" his humblest worker. That's just a rhetorical screen to make Whole Foods' likely left leaning customers think they're giving their money to a "responsible" capitalist. If I had to make a guess, I'd say he's probably paid precisely like his competitors. When I have a moment, I'll check.


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The vice of gambling

I've always been pretty ambivalent about gambling. On one hand, I don't think much of it for myself. There are better ways to get money, and I can think of much better ways to get a quick mental buzz. On the other hand, I didn't really believe it could do much harm to normal, adult people. I've been to casinos. It all seemed kind of stupid and innocuous.

Well, I spent a recent evening visiting a sort of underground poker room, in a half-abandoned warehouse in the countryside, accompanied by enough dour looking friends to make sure I got back home if the place turned out to be more dubious than "underground poker room in an abandoned warehouse" sounds. It wasn't actually - the people were friendly and organized, and my friends had fun. But watching the play, something really really obvious occurred to me. This stuff clearly is more addictive than it seems. People were throwing huge amounts of money into the game, despite clear evidence they were outclassed by a couple of others who were using the whole set-up to milk them clean. I mean, these folks had literally no chance to win, and yet there they were - gleefully throwing twenty dollar bills into a complete black hole. What worried me most was when I saw someone who had said before the game that their limit was $50 suddenly extract another $50 from his wallet in the heat of the moment. These people weren't rich - I got the impression that every dollar hurt.

Anyway, none of this makes me think any differently about the legality of gambling. All forms should be legal in some way, regulated or not. But the harm it causes is less chimerical than I thought. The poker renaissance might have a darker tinge than I had been arguing to people.


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