Would-Be Philanthropist Takes On Herbalife, Fails Miserably
Political activism is an indulgence of the rich. Whether it’s Aristotle’s musings on the nature of magnanimity or the 21st Century CEO’s cliché “Those companies that do well have to do good!” — you can do more if you have more.
Sure, I can donate enough money to my local PBS station to earn a tote bag. But Bill Gates, Oprah Winfrey, George Soros, and the Koch Brothers can change the world. Peer pressure among billionaires must be intense, because Mark Zuckerberg wanted to change the world so bad he donated so much money he’d never have to pay taxes again.
In order to, for lack of a better term, apologize for being successful, many corporate titans feel they need to be social justice warriors first and business leaders second. One example is Unilever CEO Paul Polman who “put superficial feel good policies ahead of sound business decisions,” outraging his shareholders and employees. But my new favorite wannabe genius-billionaire-playboy-philanthropist is Bill Ackman — the only thing standing in the way of his saving the world is what a dreadful businessman he is.
A hedge fund manager, Ackman is the CEO of Pershing Square Capital Management. Forbes estimates his wealth at $1.3 billion and it has dropped from last year’s number. On Tuesday, we learned that he’d laid off 18 percent of his staff — including his driver! — because his fund is doing so badly. It’s suffered three consecutive years of losses, and that’s despite the amazing Trump stock market boom of the last year.
But apart from being a lousy businessman, Ackman is most famous for his bizarre crusade against the herbal supplement industry. He has spent millions in the last five years to discredit and bankrupt the nutritional shake and supplement company Herbalife — accusing the company of lying to buyers and sellers as far back as 2012. Ackman has hired an army of lawyers, lobbyists, and publicists in his effort to discredit Herbalife and manipulate the government into crushing the company.
His mission against Herbalife might be quixotic if it weren’t so spiteful — or profit driven.
Ackman has bet on Herbalife’s failure. He has shorted the stock and, in order to not lose millions, needs to see the company fail. In order to try to drive the company’s stock down, Ackman has pressured state and federal regulators to investigate Herbalife. (He’s even paid people to rally against the company.)
In 2014, Ackman admitted on Bloomberg TV he’d spent $50 million on this campaign, and ABC reported he’d paid a whistleblower $3.6 million for damaging information against the company!
Ackman has had some luck with his campaign, but not a lot. In 2016, the Federal Trade Commission (FTC) required Herbalife to pay $200 million in consumer relief and to make changes to its business practices. The FTC required 80 percent of Herbalife’s retail purchases to come from consumers rather than distributors. Herbalife made the changes, and earlier this year, the FTC gave the company its stamp of approval: 90 percent of its 3 million retail US transactions were from consumers.
The effort to discredit Herbalife has backfired.
Last August, Herbalife announced they would go private, buying back its outstanding stock. Its shares jumped 9 percent. By October, the stock was at a three-year high, so Ackman’s options were at a commensurate three-year low. A Bloomberg article wisecracked that he couldn’t “even make money off himself.”
Exploiting our democracy’s mechanisms of accountability — regulators, the press, protests, whistleblowers — for profit is a despicable act, especially while insisting that you’re a philanthropist. This “billionaire philanthropist” doesn’t deserve to use the same word that describes Oprah or the Gates. Fortunately, he’s recently started to shy away from that title, announcing he plans to focus more on investing. In response, Bloomberg again joked: “What was he doing before?”
As Ackman’s empire crumbles, it’s hard not to take some pleasure in seeing someone reap what he has sown. Who knows? Maybe if things go really bad for Ackman he could get a job as someone else’s driver — the CEO of Herbalife, maybe?
Jared Whitley has worked in the Senate, the White House, and the defense industry. He recently completed an MBA from Hult International Business School in Dubai.
