Tyson’s Choice of CFO Raises Concerns About Potential Conflicts of Interest

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The meat producer named its chairman’s 32-year-old son to take on the role of head of finance. The Tyson family controls a large portion of the voting rights in the company.

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The Springdale, Ark.-based company — which is largely controlled by the Tyson family — said Tuesday that John R. Tyson, who currently serves as executive vice president of strategy and chief sustainability officer, will step into the role of CFO on Oct. 2. He will replace Stewart Glendinning, who was named CFO in 2017 and will remain with the company. Mr. Tyson joined the company in 2019 after working in investment banking at JP Morgan & Chase.

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Although the company, which trades on the New York Stock Exchange, did not violate any securities regulations in its appointment, observers say it raises questions about investor protections and the board’s independence. Mr. Tyson’s father, John H. Tyson, has been chairman since 1998 and served as chief executive from 2000 to 2006. The elder Mr. Tyson’s aunt, Barbara Tyson, has been on the board since 1988.

Joseph Grundfest, a senior faculty member in the Corporate Governance Center at Stanford University’s Law and Business Schools, said the main issue before the company’s board is to ensure it can eliminate the younger Mr. Tyson role, which makes them father-son duo. Despite the relationship, it should not be done. , “The main question is whether he is capable of doing the CFO job,” said Mr. Grundfest.

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Regarding Mr. Tyson’s appointment, a company spokesman said there was no conflict of interest. Chief Executive Donnie King, with a 13-person board of mostly independent directors, oversees the performance of the company’s executives, including the CFO, the spokesman said. The company declined to provide Mr. Tyson or other family members for comment.

The company has two classes of stock, each with different voting rights on matters such as the election of directors. Most investors are entitled to one vote per share, but the Tyson Limited Partnership—the entity representing the family’s holdings—owns nearly all of its shares, with 10 votes for each share. According to a securities filing, the Tyson family held about 71 percent of the total voting rights as of December 2021.

“It is related [that] They hired a 32-year-old man with minimal financial experience, but that’s a risk minority shareholders take when buying shares of a family-owned company,” said Rebecca Scheumann, a senior equity analyst working for the financial research arm. Huh. -Services firm Morningstar Inc.

According to Krist Kolder Associates, an executive search firm, Mr. Tyson will be the youngest CFO in a company in the S&P 500 or Fortune 500. The title is currently held by Cass Vant Hoff, CFO of Diamondback Energy. Inc.,

who was 35 as of mid-April. Krist Kolder said the average age of CFOs at companies in the S&P 500 and Fortune 500 is 53.1 years for men and 52 years for women.

While at the company, the younger Mr. Tyson oversaw stability and other issues, as well as managing strategy, mergers and acquisitions and purchases including commodity purchases. The company said the incoming CFO will retain responsibilities for corporate growth, strategy and sustainability. Mr. Tyson previously held roles in private equity, venture capital and investment banking including JP Morgan,

He earned a bachelor’s degree in economics from Harvard University and a master’s degree in business administration from Stanford University.

“Naming your son CFO in a public company is unusual,” said Charles Elson, founding director of the Weinberg Center for Corporate Governance at the University of Delaware. Such family relationships can compromise the independence of both parties, cause issues in cases of disagreement or underperform, and raise questions about favoritism, Mr. Elson said. “It introduces a personal angle that shouldn’t be included in a professional relationship.”

Still, Mr. Tyson’s promotion is in line with the company’s practice of “keep it in the family” and other family-led businesses in which family members move into executive leadership roles at a younger age than is standard at other companies. Go, said Kathy Log, head of financial executives Stanton Chase, practicing at an executive search firm.

“Whether he is ready for the top spot is still to be determined, but he will benefit from a strong leadership team around him, including Stewart Glendining,” said Ms. Log. The current CFO Mr. Glendinning will remain with the company and will become the group president of prepared foods.

Other examples of close family ties in US public companies include Caravan. Co.

Used car retailer operated by the Garcia family, steel and mining company Cleveland-Cliffs Inc.

and automotive retailer Sonic Automotive Inc.

Charlotte, NC-based Sonic Automotive is led by David Bruton Smith, son of the company’s founder, O’Bruton Smith, and longtime chairman before he passed away earlier this year. The younger Mr. Smith also sits on the board of the company along with his brothers, Marcus Smith and B. Scott Smith. Smith collectively controls more than half the voting power in the company as of March, according to a securities filing. Sonic did not respond to a request for comment.

Celso Goncalves, meanwhile, is the Chief Financial Officer at Cleveland-based Cleveland-Cliffs and is also the son of the company’s president and CEO, Lourenco Goncalves. A spokesperson for Celso Goncalves said the finance major has a strong financial background and has overseen the company’s capital structure and growth and as CFO executing M&A transactions.

Ernie Garcia III spun off the Tempe, Ariz.-based Carvana in 2012 out of Drivetime Automotive Group Inc., a car dealership started in the 1990s by his father, Ernie Garcia II. Mr Garcia II, while not an executive or director, owns about 85% of the company’s voting shares, along with his son, Businesshala reported in 2021. Carvana declined to comment.

jennifer williams-alvarez [email protected] . Feather

Credit: www.Businesshala.com /

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