In an industry where transparency is moving from buzzword to expectation, no channel would seem to benefit more from an open-book approach than multi-level marketing. This makes the vague language surrounding the resignation of Herbalife CEO Richard Goudis stand out as a sour note for a company that has had a surprisingly solid run of good news in recent months.
A company statement attributed the resignation to comments Goudis made prior to his ascension to CEO. The comments were described as “contrary to the Company’s expense-related policies and business practices.” A media spokeswoman offered no further comment to a request from the Nutrition Business Journal. Michael O. Johnson, who led the company before Goudis, will serve as interim CEO.
The lack of details is not uncommon to CEO resignations in any industry, but seems especially unhelpful in the MLM channel. Within this sector, suspicion on the parts of both the public and federal investigators remains high. Herbalife is no stranger to scrutiny. The company paid $200 million in a 2016 settlement with the Federal Trade Commission over issues related to recruiting distributors and is is currently under investigation by the Securities and Exchange Commission and the Justice Department.
Constantly recruiting distributors is a do-or-die component of the MLM business model, and the channel is infamous for questionable practices. As a high-profile company, Herbalife attracts a large number of critics, most notably investor Bill Ackman who loudly described the company as a pyramid scheme and lost millions in a short sale strategy.
Herbalife, however, did well under Goudis’ leadership. The stock was within pennies of its 52-week high Tuesday before his resignation was announced, up more than 60 percent since Goudis took the helm in 2017. According to one insider, who opted not to be named, Goudis was well regarded within the company and has been noted as a force for reform in the supplement industry, reportedly playing a part in the creation of the Council for Responsible Nutrition’s Online Wellness Library product registry. News of his resignation was a shock to many in leadership positions at Herbalife, the insider said.
That the resignation goes unexplained is not unexpected—companies big and small are typically reluctant to comment on such departures—but the MLM channel and Herbalife in particular would seem to benefit from more transparency. Speculation on Goudis' involvement in activities currently under investigation, unfounded or not, is inevitable.
Both the supplement industry as a whole and the MLM channel already face skepticism. An MLM company in the industry operates under an especially heavy cloud of suspicion.
There are undoubtedly legal reasons for keeping the resignation statement vague, but building public trust is evidently not one of them.