If you’re selling to one side of the political divide, don’t get too loud on behalf of the other, or Foolish investors may have to sell your stock.
With Americans divided politically as seldom before, it just makes business sense to keep your head down. It’s tempting to speak out loudly on the issues of the day, especially those impacting your bottom line. But do it carefully.
Whole Foods Market, Inc. (NASDAQ:WFM)
The best example of how not to do this is Whole Foods Market, Inc. (NASDAQ:WFM). The company caters to upscale, socially conscious consumers, who tend to vote Democratic. But its co-CEO and founder, John Mackey, loudly proclaims himself a libertarian and tends to support Republican causes.
Not that there’s anything wrong with that, as Seinfeld said. And Mackey’s company was not badly hurt by his 2010 profile in The New Yorker, where he loudly proclaimed political ideas in direct variance to those of his customer base. Since that profile ran, in fact, WFM has doubled in value.
But as health reform has kicked in, Mackey has been taking it up a notch. He called it socialism, then fascism. He also claimed he would cut workers’ hours in response to the law, denying them the 30 hours work necessary to get coverage under the law.
For a guy who calls himself “daddy” to his workers, and his workers “team members,” this may have been too much for some shoppers. Shares tanked after earnings fell recently. The Motley Fool’s Blake Bos suggests that WFM is now a buy, but I question that.
Mackey himself has always been shocked at how few competitors have copied his act, which consists of charging premium prices for premium goods, and bragging about it. Well, privately held HEB finally has, and in his home market of Texas, under the name Central Market. Nine such stores are now open. Mackey’s shoppers are getting alternatives, and are starting, slowly, to vote with their feet.
Darden Restaurants, Inc. (NYSE:DRI)
Like many other companies in the service industries, Darden Restaurants, Inc. (NYSE:DRI) – owners of Red Lobster, Olive Garden, and other mid-scale restaurants – saw an opportunity to limit costs in the health care law.
The company, rather loudly, said it was experimenting with turning its 45,000 employees into part-timers, specifically to evade the law’s requirements. Worker groups have begun picketing the restaurants even though the company has publicly backed away from its plans.
But damage is being done. The company lowered guidance in December, and the stock promptly fell out of bed, falling almost 20% in a matter of weeks, despite the maintenance of a handsome 20 cent/share dividend.
It may well be that companies like Darden, which hire a lot of low-skill workers, will face higher costs due to health reform, the minimum wage, and other measures. Higher costs put pressure on margins, regardless of a store’s politics. But it’s one thing to lobby privately, another for a CEO to lobby publicly. And lobbying publicly against the interests of your workers can leave scars on investors, not just management.
Wal-Mart Stores, Inc. (NYSE:WMT), where founder Sam Walton started the drive to call workers “associates,” making many of those early workers into millionaires through purchase of company stock, is now ground zero in the American labor movement.
The company has been very loud in opposing organization of its workers, and on the surface has paid no price for it. Other than to make its stock a bargain.