diving letter:
- Tyson Foods, Inc.’s promotion of John R. Tyson, son of CEO John H. Tyson, to the CFO seat could potentially pose a conflict of interest, legal experts say. Tyson, the world’s second-largest processor and marketer of chicken, beef and pork, announced the promotion in a filing filed Tuesday.
- Tyson, 32, has minimal senior finance experience compared to his predecessor Stewart Glendinning, who took his first CFO position at Molson Coors UK in 2005, according to his LinkedIn profile.
- Tyson previously served as Chief Sustainability Officer for the group from September 2019 to present. His move to CFO is scheduled to take effect on October 2. The promotion comes as the company is struggling to fill customer orders given the surge Labor costs, feed ingredients, live animals and freight costs.
Dive insight:
Experts say the move raises questions about a potential conflict of interest, although it doesn’t directly violate securities regulations.
The main concern is whether or not the board will be able to terminate Tyson if he doesn’t come forward father-son relationship that exists between the chairman and the chief financial officer.
“A conflict may exist when a situation arises where the personal interests of a team member or family member conflict with the interests of Tyson Foods or a team member uses their position at Tyson Foods for personal gain.” reads the company’s code of conduct, which appears to be filed with the Securities and Exchange Commission (SEC). Donnie Smith, then-CEO of the Springdale, Ark.-based company, noted in the filing that these policies were derived from existing policies and procedures and that there is “no single document” that can address all situations that arise. The company claims that “You have a duty to avoid a conflict of interest, or even the appearance of a conflict,” the company’s website reads.
“Research on cognitive bias shows that we often think of decisions as ‘business’ decisions rather than ethical ones. One risk here is a “slippery slope” where the CFO could make small mistakes (e.g., sharing company documents that only the CFO might have access to with family members) that grow into bigger ones,” said Nicole Coomber , Associate Dean and Professor of Management & Organization at the Robert H. Smith School of Business at the University of Maryland in an email reply to questions.
Another concern about the appointment is Tyson’s age. The average age of the CFOs of the top 1,000 US companies by revenue is 54 years. according to a study by Korn Ferry. The younger John Tyson takes over the financial helm at just 32 years old.
“I think we’re going to see more C-suite executives in their 30s. Experience is a double-edged sword; it can trick us into believing we know the right answer when faced with situations similar to those we’ve already experienced,” he said coomber.
Although Tyson has experience as the company’s chief sustainability officer, his financial industry experience is limited to various roles in investment banking, private equity and venture capital, including JP Morgan from 2012 to 2017, the company said in the SEC filing.
“We can have blind spots when it comes to our loved ones,” Coomber said in an email. “Typically, any family business where a family member is appointed to leadership needs to ensure they have a transparent governance model and a family charter that specifically addresses conflicts of interest management,” she said.
Former WeWork CEO Adam Neumann notoriously appointed his wife to a senior marketing position and then allowed her to use company funds to start a school, Coomber noted. This is not to say that family members should never be appointed to senior positions, she said.
Tyson Foods has a long history of putting family members in positions of power and making them one of the wealthiest lines in the US according to Forbes.
Barbara A TysonCEO and aunt of the elder John Tyson, has a “substantial personal interest” in Tyson Foods as the sole income recipient of the BT 2015 Fund, which is a limited partner of the Tyson Limited Partnership, according to her biography on the company’s website.
Additionally, John H Tysonthe father and CEO of the new chief financial officer, has been in office since 1984 and also has a “significant financial interest” in the company through his involvement in the partnership.
The company did not respond to requests for comment.
